An Exploration and Characterization of Financial Performance of Standard and Poor’s 500 Index Constituents Led By Female CEOs

Abstract

Numerous studies on corporate leadership show a disproportionately high number of men relative to women serving as Chief Executive Officer (CEO). According to BoardEx, as of the end of 2019 only approximately five percent of Standard and Poor’s 500 Index companies were led by a female CEO. Working with Standard and Poor’s Global Market Intelligence financial data from Compustat along with CEO gender data from Catalyst to investigate when female CEOs are hired and which financial factors contribute to a company having a female CEO. As having a female CEO is only one measure of a company’s dedication to diversity, two additional metrics were used as well, companies whose CEOs have taken the Catalyst Champions for Change Pledge and a list of SSGA Index constituents. The aim of this study is to understand under what financial circumstances a company hires a female CEO as opposed to a male CEO, and to explore if female led firms display financial patterns that are distinct from male led firms. Our approach is twofold, using time series analysis to interrogate trends in share price in the 12 months preceding and 12 months following CEO hire, and using clustering methods to better understand if certain financial metrics characterize companies that hire a female CEO. Our study is focused on Standard and Poor’s 500 Index companies that have hired a new CEO since the year 2000. Financial metrics explored in this study are stock returns, stock volatility, earnings per share, EBITA margin, gross profit margin, cash flow margin, return on assets, return on equity and return on capital. Dimension reduction was used and k-means clustering performed on the first three principal components. Preliminary results indicate that male and female led firms cluster together financially. Due to the inevitably high male to female ratio in corporate leadership, there are many fewer female led companies and these naturally group within the high density clusters.