Female Presence in Top Management Teams and Firms’ Risk-Taking

We examine the effect of female presence in top management teams (TMTs) on firms’ risk-taking by employing data on the executives of U.S.-listed firms from 2005 through 2018. Exploiting state-level variation in policies supporting women and families in the workplace as an instrument, we show that firms with a higher number of female executives in TMTs have lower stock return volatilities. The effect of female TMT presence on firm risk is larger in small firms, wherein decision-making processes presumably depend more on individual TMT members’ characteristics than in large firms. We find evidence that firms with female TMT members tend to make less risky choices in managerial decisions, especially regarding operating leverage. This study provides important opportune insights into the risk consequences of gender-diverse TMTs.