Study Finds Gender Biases Shape Investor Reactions to CEO Responses to Shareholder Activism

New research from Cornell University reveals that investors respond more favorably to CEOs who conform to gender stereotypes when addressing shareholder activism. Female CEOs are viewed more positively when they adopt cooperative approaches, while male CEOs receive higher approval when they adopt dominant or assertive stances, according to the study published in Contemporary accounting research.

The research, led by Kristina M. Rennekamp, ​​professor of accounting at Cornell’s Samuel Curtis Johnson Graduate School of Management, highlights how investors’ gender-based biases can influence their perception of CEO behavior in the context of shareholder activism, a tactic often used for cover. funds to promote changes in companies.

One of the key findings, Rennekamp noted, is that both CEOs and women are judged negatively when their behavior deviates from gender expectations. “Investors’ evaluations were not based on whether they believed cooperation or assertiveness was the right approach, but rather on the perceived ‘right approach’ for a leader of a given gender,” Rennekamp said .

The study, co-authored by Blake A. Steenhoven of Queen’s University and Scott C. Jackson of the University of Nevada, Las Vegas, sheds light on how gender stereotypes affect investor behavior and decision-making in the corporate world .

Gender expectations in shareholder activism

Using experiments and interviews, the researchers explored how investors perceived male and female CEOs responding to shareholder activism. The first experiment revealed that female CEOs who adopted uncooperative strategies were rated less favorably than those who were more cooperative, reinforcing traditional gender stereotypes. Conversely, male CEOs were praised for their assertiveness, with cooperative strategies viewed less favorably.

In a second experiment focusing on female CEOs, the study found that when female leaders provided communal explanations, such as acting uncooperatively out of concern for shareholders, they were perceived more positively. This suggests that while female CEOs may face harsher scrutiny for uncooperative behavior, they may mitigate negative investor perceptions by framing their decisions in ways that align with communal or relational values. .

“Our findings have broad implications for corporate governance,” Rennekamp said. “Female CEOs may feel pressure to cooperate with activists not because of inherent management styles, but as a strategic move to manage investor biases.”

Communication as a key tool

The research also emphasizes the importance of communication in shaping investor perceptions. The ability to craft messages that align with investor expectations, especially for female CEOs, can be essential to maintaining positive sentiment, especially when responding to shareholder activism.

Interviews with six CEOs and CFOs indicated that many executives are aware of these gender investor biases and the need for careful messaging. This awareness can influence how corporate leaders, especially women, navigate complex shareholder dynamics.

The study adds to a growing body of research suggesting that non-professional investors may rely on CEO gender when making decisions, especially in ambiguous situations such as shareholder activism.

Implications for women CEOs and shareholder activism

The findings also provide a possible explanation for why female CEOs are more frequently targeted by activist shareholders. Rather than reflecting inherent gender differences in management styles, the study suggests that activists may anticipate more cooperative responses from female leaders because of investor expectations.

For female CEOs, the study offers practical insights. Providing community justifications for decisions, even when taking a strong stance, can help mitigate negative reactions from investors. This approach can prove valuable in navigating the biases that continue to shape corporate governance.

“As the corporate governance landscape evolves, recognizing and addressing these subtle but powerful biases will be crucial to fostering fair and effective business practices,” Rennekamp said.

The study highlights the persistent influence of gender stereotypes in the corporate world, particularly in the area of ​​shareholder activism, and underscores the importance of understanding and addressing these biases to support equitable corporate leadership.

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