CEO Gender and Responses to Shareholder Activism

Abstract

Recent literature finds that firms led by female CEOs are more likely to be targeted by activist shareholders, and that female CEOs are more likely to cooperate with activist shareholders’ requests. Our study complements this literature by investigating how a CEO’s response to shareholder activism influences investors’ reactions, and whether reactions differ depending on the gender of the CEO. Using an experiment, we find that investors evaluate a firm as less attractive when a female CEO uses an uncooperative response rather than a cooperative response to shareholder activism. Alternatively, investors evaluate a firm as less attractive when a male CEO uses a cooperative response rather than an uncooperative response. Our results suggest that investors rely on gender stereotypes when evaluating the responses of male and female executives to shareholder activism, and that these evaluations affect their investment judgments. Our results also suggest a potential alternative explanation for the finding that female CEOs are more likely to cooperate with activist shareholders than male CEOs. Rather than inherent differences in the management style of male and female CEOs, responses may be driven, at least in part, by managers anticipating that they will be penalized by investors for deviating from gender-stereotypical behavior.