Gender and CEO Succession

What happens to a company when the previous CEO is a man and the new one is a woman.
Gender and CEO Succession

When the new CEO isn’t the same gender as the previous one, the CEO succession process is even more disruptive and company performance can suffer. This dynamic increases the likelihood that the new CEO will make an early exit. That’s the conclusion of a new study conducted by Yan “Anthea” Zhang, the Fayez Sarofim Vanguard Professor of Strategic Management at Rice University’s Jones Graduate School of Business in Houston, Texas, and Hongyan Qu, an assistant professor at the Central University of Finance and Economics in Beijing, China.

The co-authors studied 3,320 CEO successions in companies listed on China’s Shanghai and Shenzhen stock exchanges from 1997 to 2010. They found that companies tend to have lower post-succession performance when women follow men as CEOs than when the new CEO is the same gender as the previous one. They also found that both male-to-female succession and female-to-male succession increase the likelihood of the successor’s early departure.

Because most CEOs are men, the gender change at the top is most likely to be male to female, Zhang notes. “In order to avoid disruption associated with gender change, companies tend to stick to the status quo—that is, they appoint a male successor,” she says. “Therefore, companies’ tendencies to avoid such a disruption at least partially contribute to the persistence in gender inequality in corporate leadership positions.”

Zhang and Qu identified ways to minimize disruption when women follow men as CEOs. For instance, having women on the board and in top management can make it less likely that a female CEO will make an early departure. Also, it is less disruptive to hire female candidates internally than to do so externally. “These contextual factors emphasize the importance of grooming female corporate leadership within companies,” Zhang says.

“The Impact of CEO Succession with Gender Change on Firm Performance and Successor Early Departure: Evidence from China’s Publicly Listed Companies in 1997-2010" is forthcoming in the Academy of Management Journal.