Daily Academic Alpha: Why Women Should make MORE than Men…

Daily Academic Alpha: Why Women Should make MORE than Men…

July 17, 2015 Uncategorized
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(Last Updated On: January 18, 2017)

As the proud father of 3 kids (to include 2 daughters), this set of papers, while a bit off the wall, made me smile a bit.

In short, there seems to be a negative relationship between women and lawsuits–the more women surround an organization, the less legal trouble the organization faces.

It would be great if the relationship was 100% causal, but the data don’t fully allow the authors to make such a bold claim. Nonetheless, correlation–with some evidence for causation–is good enough for me…now I have more ammo to convince my wife we should have more kids…

Does Your Daughter Make You a Better CEO?

This paper investigates the effect of the gender of CEOs’ offspring on corporate performance. I collect a dataset of the gender of CEOs’ children and employ a firm fixed-effect model to estimate a number of positive effects of CEOs having daughters. First, acquisitions, debt and equity offerings made by CEOs with more daughters are better received by the market. Second, CEOs with more daughters are less likely to overpay the targets and better use newly raised capital. Third, CEOs’ daughter(s) decrease(s) corporate litigation risk. In sum, the gender of a child is arguably a random and natural experiment, which shows a clear effect on CEOs’ behavior.

Do Women Stay Out of Trouble? Evidence from Corporate Litigation

We use a unique hand-collected dataset on corporate lawsuits to examine the effect of female representation in top management on corporate litigation. After controlling for other important variables and accounting for endogeneity using a novel instrument, we find that firms with higher representation of women in the top management team face fewer lawsuits overall, particularly lawsuits related to product liability, environment, medical liability, labor and contracts. Among firms with higher litigation risk, greater representation of female executives positively impacts the value of cash holdings. Overall, our results uncover an important and previously unidentified benefit of gender diversity in top management.


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Definitions of common statistics used in our analysis are available here (towards the bottom)




About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.


  • jimhsu

    Of interest: http://www.businessinsider.com/kevin-olearys-female-ceos-make-all-the-money-2015-5#ixzz3aIz0mHVu

    My hypothesis to what’s going on:

    1. Females have a more conservative view of capital allocation (supported by a ton of research). Includes avoiding low-probability opportunities (“what works” instead of crazy “brilliant” ideas), less financial leverage, more conservative profitability assumptions.
    2. A “Need to deliver” mindset. Females that choose to compete in things such as this have a need to prove oneself in a classically male-dominated arena. This results in decreased overconfidence (an excess of which is uniformly associated with trading losses). Similar reasoning applies for certain minorities in the workplace. Interestingly this trait also hurts women in salary negotiations with (male) managers, as that’s one of the few arenas where overconfidence translates to success. (Getting raises is a psychological game, not a rational game).
    3. Longer-term goal horizon. Startups are ruined typically by running out of funding before the idea can be actually established (and garner more funding). I think this is an evolutionary predisposition due to being the classic child-rearing side of the population (no feminist comments please), but that may change in the modern age of human development.

  • all 3 make sense to me.

  • sandy

    Follow up blog post with female management correlation to excess returns?