Why do Male and Female CEOs exit? Firm Performance & Board Homophily

Abstract

Corporate governance and strategy research investigates the effects of firm performance on the likelihood of CEO turnover, but has failed to considere potential gender differences in CEO turnover and how the board’s gender composition may affect this process. This paper investigates CEO exit among all medium- and large-sized firms in Sweden that are privately owned between 2005 and 2010. Controlling for a wide array of industry-level, firm-level, and individual-level variables, we find that CEOs are more likely to exit from firms that experience negative results or have a declining performance trend. For male CEOs it is the negative result that drives the exit; for female CEOs a negative performance trend increases the likelihood of exit. Consistent with homophily and token theories, the level of gender and age diversity of the board has a negative effect on the exit of female CEOs but is not associated with male CEO exit. It thus appears that female CEOs are less pressured to exit when their firm is experiencing low performance, but more likely to exit when the board is composed predominantly by men or of individuals that are similar in age. We discuss implications for research in strategy, corporate governance, and gender.