Do women empower other women? Empirical evidence of the effect of female pervasiveness on firm risk‐taking

Abstract

This study examines the relationship between female pervasiveness within the entire company and firm‐risk taking. We exploit The UK Equality Act (2010), further enforced in 2017, which was made mandatory for firms operating in UK to disclose their gender pay gap. We use this measure to proxy female pervasiveness and we find it to be negatively associated with firm risk‐taking. These results are robust to several tests using female participation in each pay quartile and the difference in bonus payments between men and women. Our findings provide insights into the role played by women consistent with tokenism theory predictions.

A systematic literature review of studies on women at the top of firm hierarchies: critique, gap analysis and future research directions

“…Furthermore, through time series analysis, the authors find that an increase (decrease) in firm risk-taking is associated with female-to-male (male-to-female) CEO transitions. Perryman (2016) provides similar results by expanding this analysis to include female executives who are members of TMTs, while Ciappei et al (2023) found that female pervasiveness within the company to reduce firm risk-taking.…”

“…More than two decades after the first law regulating gender diversity in corporate boards was introduced, concerns over its effectiveness and the need for legal mechanisms are being revisited. The gender pay gap regulation introduced in the UK in 2017 and European Union member states’ increasing focus on transparency and disclosure about women’s participation and their role in companies (Ciappei et al , 2023) represent confirmation of the growing public concern over the behavior of international companies. In this sense, the results of the study enable policymakers to make informed regulatory decisions and industry practitioners and civil society actors to understand key corporate outcomes (e.g.…”

“…Our findings reveal that the existing literature lacks consideration of other angles of gender diversity. The power to influence firm decisions and outcomes varies according to an individual’s role and responsibility and the number of members in their social group, as suggested by critical mass theory (Kanter, 2008; Ciappei et al , 2023). Our analysis reports that the literature on gender diversity lacks consideration of empowerment mechanisms among women managers and between women managers and female employees.…”

“…However, these measures lack in-depth knowledge on whether there is parity in senior roles, as they instead numerically assess female participation. Such research is crucial to understanding the various benefits and drawbacks of gender diversity (Ciappei et al , 2023). Future research could provide novel proxies to capture gender diversity.…”