Scrutiny and Acquisition Activity: Does CEO Gender Matter?

A prevailing notion suggests female CEOs have a more conservative risk appetite compared to their male counterparts. However, recent research titled Shifting perspectives: How Scrutiny Shapes the Relationship Between CEO Gender and Acquisition Activity” challenges this view. The study specifically examines how scrutiny, defined as the close examination of a company or its leadership by investors, media, and boards, influences acquisition decisions made by female CEOs.

To understand how scrutiny affects CEO decisions, authors Daniel L. Gamache, Cynthia E. Devers, Felice B. Klein and Timothy Hannigan built an extensive dataset. Acquisition data came from SDC Mergers & Acquisitions, while RavenPack News Analytics provided media attention insights. The authors also incorporated firm data from Compustat, including industry dynamism and diversification. This comprehensive approach allowed them to examine CEO gender, scrutiny, and acquisition activity.

“We used Ravenpack data to capture the volume of media coverage published about the firm each year. This measure of media coverage captured one form of scrutiny that CEOs face”, explains Daniel Gamache, Associate Professor at Terry College of Business, University of Georgia.

Core hypothesis

The central hypothesis of the research is that scrutiny acts as a moderator in the relationship between CEO gender and acquisition activity. A secondary hypothesis the authors worked with is that female CEOs are more acutely aware of scrutiny and dedicate greater effort towards managing perceptions.

“We were motivated to conduct research in this area because we believed that more nuance was needed in the discussion about the influence of female executives on strategic decision-making”, says Daniel Gamache. “We expected that the picture of female CEOs as universally conservative decision-makers might paint too simplistic a picture and that the impact of CEO gender on strategic decision-making may vary significantly depending on the context the CEOs were experiencing.”

Summary of the key findings:

Scrutiny levels the playing field

This research debunks the stereotype of female CEOs as inherently risk-averse. It reveals that external scrutiny, rather than inherent leadership styles,shapes acquisition activity.

In high-pressure environments, characterized by dynamic industries, high media scrutiny, and assertive boards, the gender gap in acquisitions disappears. However, in low-pressure situations, the gap widens, with female CEOs making fewer acquisitions. This can be explained by how scrutiny affects information processing.

Under pressure, both genders become more thorough, diminishing the impact of typical gender-based decision-making styles. Interestingly, female CEOs often excel at detail-oriented tasks, and scrutiny may even amplify this strength, leading to more robust evaluations in high-stakes situations.

In high-pressure environments, characterized by dynamic industries, high media scrutiny, and assertive boards, the gender gap in acquisitions disappears.

“Our central argument was that although, on average, female CEOs acquire less than male CEOs, the difference in acquisition activity between male and female CEOs is reduced in high-scrutiny contexts. We found support for this proposition across several forms of scrutiny, including media coverage. When firms face high levels of media coverage, the difference in acquisition activity between male and female CEOs disappears”, notes Daniel Gamache.

Beyond gender stereotypes:

A nuanced perspective

This research underscores the significance of considering the contextual environment, particularly the level of scrutiny, when examining the relationship between CEO gender and strategic decision-making. Recognizing how context shapes decision-making paves the way for transcending gender stereotypes and fostering a more equitable environment for all CEOs.