Research: Adding Women to the C-Suite Changes How Companies Think

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'First, we found that after women joined the C-suite, firms became both more open to change and less risk-seeking.'

customer experiences — among many other benefits. And of course, there is a clear moral argument for increasing diversity among top management teams . But when it comes to explaining why having more female executives is associated with better business outcomes, and what specific mechanisms cause those positive changes, existing research is much more limited.exactly how firms changed their strategic approach to innovation after appointing female executives.

To quantify these subtle cognitive shifts, we first conducted a linguistic analysis of changes in company documents issued by the TMT. We used a standard that grouped terms like “bold,” “venture,” and “chance” as likely reflecting a greater propensity for risk-taking, while terms such as “create,” “transform,” and “launch” indicated more openness to change.

Our analysis suggests that this shift was a direct result of firms’ increasing aversion to risk, as we found that when a TMT experienced a one standard deviation increase in propensity for risk-taking, the likelihood of doing an additional M&A the following year increased, on average, by 10%, while TMTs that became less open to taking risks were significantly less likely to engage in M&A activity.

 

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