Do investors like female CEO?

How do investors react when a female CEO is appointed? Does it affect other female-led firms as well? Literature Review Series #4: Dixon Fowler, Ellestrand and Johnson (2013)

We studied the research work of Heather R. Dixon Fowler, Alan E. Ellestrand, Jonathan L. Johnson (SJM 2013) in their paper – “Strength in numbers or guilt by association? Intragroup effects of female Chief Executive Announcements”. The following is a review of the paper followed by some of our own recommendations.

Fowler, Ellestrand et. al.(2013) primarily focus on the impact that the appointment of a female CEO has on the performance of that particular company and on the performance of other companies with female CEOs.

Questions
The paper by Dixon Fowler, Ellestrand and Johnson (SJM 2013) aims to examine
three questions:
1) Try to research if firms with existing female CEOs will experience positive stock
market reactions when there is a succession event resulting in the appointment of
a female CEO at another firm. As a follow up to this hypothesis, they also examine if firms with existing female CEOs will experience negative stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm.

2) Examine if media reports of CEO appointment announcements are more likely to
link female CEOs as an entitative group based on gender compared to male CEO counterparts.

3) Dwell on whether firms with existing female CEOs will experience negative stock
market reactions when there is a succession event resulting in an announcement of
a female CEO dismissal at another firm.

Sample
The sample used in their study consists of 369 firms in the portfolio of appointment events
and 90 firms in the portfolio of dismissal events at female-led firms, and 424 in the portfolio of appointment events for male-led firms.

Methodology
To test hypotheses 1 and 3, they use an event study methodology with the CRSP (1991-2006) equally-weighted index as a proxy for market returns. They conduct a text analysis on the male and female appointments to test hypothesis 2.

Findings
Their findings suggest that, firms with existing female CEOs do not experience positive stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm. To investigate about the follow up hypothesis, they find that firms with existing female CEOs experience negative stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm. In the analysis of Hypothesis 2 it was found that 55% of female CEO announcements referred to other female CEOs whereas no male CEO announcements referred to other male CEOs. Finally, for the third hypothesis they find that firms with existing female CEOs do not
experience negative stock market reactions when there is a succession event resulting in an announcement of a female CEO dismissal at another firm.

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