Female management, overconfidence and debt maturity: European evidence

Abstract

This paper investigates how female involvement in management shapes the nature of the firm’s financial decisions in terms of debt maturity. It is suggested that female managers, being less overconfident and more conservative than men, will opt for more short-term debt to preserve financial viability in the capital structure. Using panel data for listed and unlisted European companies, we show that the presence of female executives increases the level of short-term debt financing. Moreover, we examine the financial impact of gender heterogeneity moderated by cultural differences among countries related to masculine/feminine traits in society. Female executives seem to prefer a higher level of short-term debt, especially in countries with high masculinity scores, where competitiveness and material rewards for success are very relevant. These results show that companies run by women, particularly in a “masculine” environment, tend to prefer a more flexible capital structure, reinforcing the hypothesis that female executives are less overconfident.