Are Women Decision Makers More Risk Averse Than Their Male Counterparts?



CG Insights -Top corporate governance experts report on the latest research about corporate governance in emerging markets. Dr. Renee Adams is Professor of Finance and Commonwealth Bank Chair in Finance at the University of New South Wales’ Australian School of Business. Her research explores the intersection of gender, corporate governance and company performance.

The most interesting piece on corporate governance I read recently was….

…A study by Uri Gneezy, Kenneth L. Leonard, And John A. List about gender differences in competition and how societal structures impact this. 

The study compares a female-dominant society in India – the Khasi – and a male-dominant society in Tanzania – the Maasai. It reveals that men are twice as competitive as women in the patriarchy, while women are more competitive than men in matrilineal societies. In fact, the study finds that women in the matrilineal society tend to be even more competitive than the men in the patriarchy when the groups are compared. 

So, the gender differences reverse depending on which gender dominates, and women show themselves as strongly competitive beings in a society that encourages this behavior.

This is an interesting finding because it demonstrates that men and women are not biologically engineered to act differently. Instead, it suggests that these differences are societal in nature. It also has implications for the corporate arena: maybe if there was increased gender parity in terms of wages and advancement potential, perhaps some of the observed differences in men and women would be reversed – or, at the very least, minimized.

Right now, I am working on…

…A study demonstrating that there are fewer differences between male and female corporate board members in their approach to risk than the existing body of economic literature suggests.  There’s been a lot written about this idea of the “Lehman Sisters.” The theory is that if financial institutions like Lehman Brothers had more women on their boards then the financial crisis never would have happened because women tend to be less prone to taking risks.

While this notion has gotten a lot of play, my co-author and I argue that it’s incorrect. In fact, we posit that women at the top who have gotten there on their own merits act in ways that are quite similar to their male counterparts when it comes to risk taking. 

A look at the assumptions underlying the “Lehman Sisters” hypothesis reveals a fundamental flaw. Gender differences between women and men in the general population – including high school students and women and men who never held any kind of managerial position – are equated with gender differences between high-powered female and male executives. 

The problem here is that you can’t simply extrapolate from the general population to the boardroom. 

In my new research, we’ve addressed this by narrowing the focus to compare similar populations:  women who sit on bank boards and men who sit on bank boards. We look at the way they deal with stock volatility, among other measures of risk handling.

Our findings reveal that more diverse boards do indeed behave differently from less diverse boards. However, they also show that having a more diverse board doesn’t necessarily lead to increased risk aversion.

I think the most relevant CG research topic for emerging markets now is… continue reading here!


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