In which areas are female CEOs more risk takers? A study of US hightech industry

“Women are less ambitious than men. Female leaders tend to take less risks with their business decisions”. These are often repeated sentences that, according to professor Rose Neng Lai, are not always true. The established finance academic from the University of Macau uncovered these myths in her presentation at the 14th Annual Financial Market Liquidity Conference at the Corvinus University of Budapest. As she said in her speech on 10th of November, since female CEOs are generally considered to be more risk-averse and ethical, she and her colleagues, Shaohua Tian (Macau University of Science and Technology) and Yang Zhang (University of Macau) are curious to see whether these observations are also valid in high-tech industries, and what economic difference it makes if the CEOs and board members of the companies are women.   

Not only do they take more risk, they also achieve higher returns 

At the Corvinus event, Professor Lai described her dataset of 2,741 firms in the US, of which 1304 are high-tech firms, from 1996 to 2021. Her research objective was to explore whether gender plays a role in taking risks and what kind of risks female leaders tend to take. In their working paper entitled “The Myth of Risk Aversion from Female Leadership – the Case of US High-Tech Sector”, the authors differentiated between total and idiosyncratic risk, but the results were similar. In general, having a female CEO at the head of the company reduces the risk tolerance in general. However, the results are different in high-tech industries, where female CEOs tend to take more risks compared to men and the higher risks are associated with higher expected returns. Female board members tend to take less risks. Economic uncertainty mitigates these effects, but the trends are clearly not aligning with the usual preconception that women generally tend to be more risk averse, noted professor Lai.     

The researched female CEOs probably self-selected their jobs. Therefore, the question arises whether their background has an impact on their risk-taking behaviour. Female leaders with degrees in finance “seem to know what they are doing and seem to take higher risk, according to our data” – said professor Lai. However, female specialists tend to take lower risks. The researchers also wanted to see whether female directors and CEOs encourage innovation. It turned out that this aspect is not relevant in the case of female CEOs, but female directors have a positive effect on innovation, especially on green patents. Both female CEOs and directors are more concerned about being ESG compliant which means that having women on board actually makes a difference. 

70% of women in tech feel like they have to work harder than men to succeed 

“We care about gender topics because women in finance are underrepresented” – claimed Zsuzsa Réka Huszár, associate professor at Corvinus University of Budapest to introduce the plenary session on the 10th of November 2023. She explained that less than 2% of financial institutions’ chief executive officers and less than 20% of executive board members are female. Academics aim to address this issue by building a stronger network of professionals and exploring the situation in scientific studies. The Academic Female Finance Committee (AFFECT), which supported this special session, aims to achieve these goals. She proposed the establishment of a Euroasian Female Finance Academics Association (EFFAA) to provide similar mentoring, networking, and collaboration opportunities for female academics in the region. 

This year’s Noble Prize winner, Claudia Goldin states that women’s level of education increased in the past decades, but despite modernization, economic growth, and rising proportions of employed women, earning gaps still exists in the world. Recent studies show that women tend to work at smaller banks and 70% of women in tech feel like they have to work harder to succeed. The high-tech sector is especially interesting in this regard as it is dominated by men.  

The conference was organized by the Institute of Finance at Corvinus University of Budapest, the Game Theory Research Group at the Centre for Economic and Regional Studies, and the Faculty of Economics at Eötvös Loránd University. The presentation was followed by a mentoring event with professor Lai. 

The conference drew more than 130 participants, featuring five keynote speakers with renowned names such as Jonathan A. Batten, Thierry Foucault, Michael Halling, Rose Neng Lai, and Thomas Walker. Additionally, four invited speakers also presented at the AFML conference: Barbara Będowska-Sójka, Igor Lončarski, Gábor Neszveda, and James Steeley. The two-day event also saw a total of 38 paper and 6 poster presentations, contributing to discussions on the contemporary landscape of financial markets, and a special mentoring section for females in finance with both academic and industry professionals.