The fifth essay examines the relationship between executive and board chairper-son characteristics and firm performance. Behavioral differences between humans can often easily be noted in everyday life. In the business world, decision-making power is often concentrated in a few, therefore it is of interest to study whether and how individual characteristics of an executive may affect firm performance.
The essay focuses on CEOs and the board chairs. CEOs are included since they are usually the most visible and powerful executives in a firm. However, earlier literature often ignores chairpersons or, alternatively, they are considered in the same terms as other board members. In fact, board chairs are often very experi-enced, highly educated long-term members of the company’s administration, and they may have vast authority within their firm. For example, Brickley, Linck, and Coles (1999) report that 16 % of the CEOs that retire continue their careers by serving as the board chairs in their own companies, which supports the view of chairs having a high level of knowledge and authority within a firm.
Earlier literature indicates that various executive-specific characteristics may in-fluence their behavior at work. However, the great majority of studies concentrate on one specific characteristic of an executive at the cost of ignoring other charac-teristics that may play a significant role in determining the firm performance.
Consequently, this essay contributes to the existing literature by assessing wheth-er and how executive charactwheth-eristics may affect firm pwheth-erformance. The executive attributes covered in this essay are age, experience, busyness, quality, and gender.
The sample consists of the S&P 500 firms from 2006–2010. In general, the re-ported results indicate that demographic and experience-related characteristics may be associated with the market valuation and financial performance of the firm. Interestingly, a positive relationship is documented between female execu-tives, and Tobin’s Q and return on assets. Moreover, executive busyness seems to have a negative impact on firm performance, whereas results for executive age are mixed. The executive quality, experience, and duality are reported to be posi-tively related to the financial performance of the firm.
The reported results are in line with earlier literature documenting that female-controlled firms tend to outperform male-female-controlled firms (see e.g. Krishnan &
Park 2005; Smith, Smith & Verner 2006). In general the reported findings suggest that it is important to consider the characteristics of executives among the deter-minants of firm performance.
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FEMALE EXECUTIVES, CHAIRWOMEN, AND CORPORATE GOVERNANCE
ABSTRACT
This paper examines whether the gender of top executives and board chairs is associated with the strength of corporate governance mechanisms within a firm.
In particular, this paper focuses on the gender of the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and chairperson of the board, and uses the Corporate Governance Quotient to measure the strength of governance. Based on a six-year sample of the S&P 500 firms, the following main results are reported:
i) Female CEOs and chairwomen have a positive impact on firm’s overall corpo-rate governance. ii) When the different governance attributes are examined indi-vidually, the results indicate that female CEOs and chairwomen have the most significant influence on the governance attributes related to the board of directors.
iii) Female CFOs have a negative impact on the overall compensation index and the industry-specific takeover defenses index. Overall, the findings of this paper indicate that the gender of the firm’s executives and chairs may have important implications for the strength of corporate governance. This study provides new empirical evidence on the relationship between female executives, chairwomen, and corporate governance. The results reported in this study may provide useful information for policy authorities in relation to gender quota discussions, pro-posals, and regulations.
Keywords: Corporate Governance, Executive Gender, Female Executives, Chair-women
1 Introduction
This paper examines the association between the gender of the firm’s top execu-tives and board chairs and the corporate governance practices within the firm. The definition of corporate governance tends to vary based on discipline, but it can be broadly defined as “the study of power and influence over decision making within
I would like to thank Melissa Frye, Heather Knewtson, Mukunthan Santhanakrishnan, Stanley D. Smith, Wim Van der Stede, and participants at the 2011 Eastern Finance Association Meet-ing and the 2011 Southern Finance Association MeetMeet-ing, and at the research seminars at the University of Central Florida and Auburn University for helpful discussions and comments.
This essay was written as a Fulbright Scholar at the University of Central Florida.
the corporation” (Aguilera & Jackson, 2010). Economists, for instance, tend to see corporate governance as a combination of contracts among owners, while legal scholars define corporate governance as the set of legal, cultural, and
the corporation” (Aguilera & Jackson, 2010). Economists, for instance, tend to see corporate governance as a combination of contracts among owners, while legal scholars define corporate governance as the set of legal, cultural, and