Powerful female CEOs and the capital structure of firms

Abstract

This study examines the impact of female CEOs and their power on corporate debt usage. Adopting the framework of Finkelstein (1992), we distinguish different power dimensions to analyze a sample of 418 CEOs of non-financial U.S. listed firms over the time period of 2007–2015. We find that the leverage of firms run by female CEOs is not different from that of firms run by male CEOs. However, when firms experience a transition of male-to-female CEOs, we find some evidence of an increase in debt. Further analysis shows that the gender effect is associated with the type of power CEOs possess. Female CEOs with structural power (reflected by low frequency of board meetings) and prestige power (reflected by education from an elite university) tend to use more debt than their powerful male peers. We recommend that the gender effect needs to be studied together with the power CEOs hold.