When women are on boards, male CEOs are less overconfident

Chen, Jie; Leung, Woon Sau; Song, Wei; Goergen, Marc

Abstract

A number of governments (notably those in India, California, and parts of Europe) are pushing for greater female representation in the boardroom. And several studies suggest why: Having women on the board results better acquisition and investment decisions and in less aggressive risk-taking, yielding benefits for shareholders. What’s less clear is why these effects happen.
Our research suggests one potential reason: Having female board members helps temper the overconfidence of male CEOs, improving overall decision making for the company.
We were interested in studying overconfidence because prior research has shown that it can be detrimental to the firm and is more prevalent among male CEOs. Overconfidence leads CEOs to overestimate returns and underestimate risk, which can result in overinvestment and excessive risk-taking, destroying shareholder value. We were curious about how the board — which is responsible for supervising the CEO — might moderate a CEO’s tendency to get overconfident.

Citation

Chen, J., Leung, W. S., Song, W., & Goergen, M. (2019). When women are on boards, male CEOs are less overconfident. Harvard Business Review,

• Journal Article Type: Article
• Acceptance Date: Sep 12, 2019
• Online Publication Date: Sep 12, 2019
• Publication Date: Sep 12, 2019
• Deposit Date: Aug 24, 2021
• Journal: Harvard Business Review
• Peer Reviewed: Peer Reviewed
• Public URL: https://nottingham-repository.worktribe.com/output/6089701
• Publisher URL: https://hbr.org/2019/09/research-when-women-are-on-boards-male-ceos-are-less-overconfident