Marisa Mayer’s recent announcement that she is again pregnant, and does not plan to take maternity leave after her twins arrive, has once again raised the age-old question about how far women have really come in making a gender equitable workplace. While women are undoubtedly making progress, recent research from specialists in behavioral finance suggests that in many respects, the discussion to date has left out fascinating dimensions of gender in the workplace. Research on the psychological and behavioral makeup of women suggests that their differentiated decision-making process (relative to men) can positively influence corporate performance. For instance, in the context of investing and mergers and acquisitions women are less prone to overconfidence than men. Follow-on studies highlight how women positively affect firm economic and social outcomes.
Table from Barber and Odean (2001) highlighting female outperformance
Consider recent work by professors Binay Adhikari, Anup Agrawal, and James Malm. In, “Do Women Stay out of Trouble? Evidence from Corporate Litigation,” Adhkari et al. examine a sample of 28,709 lawsuit filings from 1996 to 2010 for S&P 1500 firms and provide evidence that female representation in top management is correlated with fewer lawsuits. The core results from the paper are economically meaningful; for instance, a one standard deviation increase in the proportion of female executives in top management cut the average number of annual lawsuits in half. Digging further, the authors find more pronounced decreases in suits related to product liability, medical liability, environmental issues, and labor and contract disputes.
But the evidence that women have positive effects on corporations doesn’t end there. The “positive female benefit” is so powerful, merely associating with females seems to improve corporate performance. Consider recent research by PhD student Vinh Nguyen from Boston College. In, “Does Your Daughter Make You a Better CEO?,” Mr. Nguyen provides evidence that CEOs with daughters are viewed more favorable by the marketplace, and are less likely to overpay on new investments. Both of these benefits are attributed to lower degrees of overconfidence. Nguyen also finds that CEOs with daughters tend to run companies with lower risks of corporate litigation (similar to the research cited above). Perhaps CEOs with daughters are more likely to have dinner table conversations about, say, workplace discrimination, than CEOs that only have sons? The CEOs with daughters might thus be better positioned to avoid this type of legal exposure at their firms.
Table from Nguyen (working paper) showing relationship between daughters and performance
As women increasingly percolate into the upper ranks of management, we can expect to see companies benefit from not only their expertise and vision. This research suggests – amazingly – their mere presence will also positively impact their peers in the still vastly-male ranks of executives. Apparently, even my two pre-school aged daughters are making their mark on my own management style (and giving me a few gray hairs)! It’s fascinating that personal relationships with females and/or the experience of having daughters are associated with positive effects on corporate performance. All firms can benefit from the positive influence of women. The progress of women in the workplace is leading to a better balance of behaviors and attitudes, which in turn should lead to better corporate, social and economic outcomes.