CEO gender, firm performance and agency costs: evidence from India
Abstract
Purpose
The purpose of this paper is to examine the effect of CEO gender on the performance of Indian firms and to explain the economic channel for any such effect.
Design/methodology/approach
Using a panel of 100 Indian firms, the authors test whether there is a significant difference in the performance – measured as return on assets (ROA) and return on equity (ROE) – of firms with male vs female CEOs, in both time and space dimensions, using the difference-in-differences approach.
Findings
The average ROA of the sample firms decrease by about 10 percent after a female enters the CEO role. This negative result remains robust in both the time series as well as cross-sectional analyses. The decline is also observed when using ROE to measure performance. Further, the authors show that this negative effect is associated with an increase in agency costs that is observed following the appointment of a female CEO.
Originality/value
Previous studies have produced mixed results regarding the effect of having a female CEO on firm performance, and the research to date has not explored the economic channel through which this effect occurs. In this study, the authors show that the decline in performance observed among Indian firms flows from an increase in agency costs under female management.
Keywords
Acknowledgements
The authors of this paper have not made their research data set openly available. Any enquiries regarding the data set can be directed to the corresponding author.
Citation
Jadiyappa, N., Jyothi, P., Sireesha, B. and Hickman, L.E. (2019), "CEO gender, firm performance and agency costs: evidence from India", Journal of Economic Studies, Vol. 46 No. 2, pp. 482-495. https://doi.org/10.1108/JES-08-2017-0238
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited