Interview: Are Women Decision Makers More Risk Averse Than Their Male Counterparts?

Corporate Governance Insights Interview Series: Top corporate governance experts report on the latest research in emerging markets.


Dr. Renee Adams is Professor of Finance and Commonwealth Bank Chair in Finance at the University of New South Wales’ Australian School of Business. Her research explores the intersection of gender, corporate governance and company performance.

The most interesting piece on corporate governance I read recently was…

…A study by Uri Gneezy, Kenneth L. Leonard, And John A. List about gender differences in competition and how societal structures impact this.

The study compares a female-dominant society in India - the Khasi - and a male-dominant society in Tanzania - the Maasai. It reveals that men are twice as competitive as women in the patriarchy, while women are more competitive than men in matrilineal societies. In fact, the study finds that women in the matrilineal society tend to be even more competitive than the men in the patriarchy when the groups are compared.

So, the gender differences reverse depending on which gender dominates, and women show themselves as strongly competitive beings in a society that encourages this behavior.

This is an interesting finding because it demonstrates that men and women are not biologically engineered to act differently. Instead, it suggests that these differences are societal in nature. It also has implications for the corporate arena: maybe if there was increased gender parity in terms of wages and advancement potential, perhaps some of the observed differences in men and women would be reversed - or, at the very least, minimized.

Right now, I am working on…

…A study demonstrating that there are fewer differences between male and female corporate board members in their approach to risk than the existing body of economic literature suggests.  There’s been a lot written about this idea of the “Lehman Sisters.” The theory is that if financial institutions like Lehman Brothers had more women on their boards then the financial crisis never would have happened because women tend to be less prone to taking risks.

While this notion has gotten a lot of play, my co-author and I argue that it’s incorrect. In fact, we posit that women at the top who have gotten there on their own merits act in ways that are quite similar to their male counterparts when it comes to risk taking.

A look at the assumptions underlying the “Lehman Sisters” hypothesis reveals a fundamental flaw. Gender differences between women and men in the general population - including high school students and women and men who never held any kind of managerial position - are equated with gender differences between high-powered female and male executives. 

The problem here is that you can’t simply extrapolate from the general population to the boardroom.

In my new research, we’ve addressed this by narrowing the focus to compare similar populations: women who sit on bank boards and men who sit on bank boards. We look at the way they deal with stock volatility, among other measures of risk handling.

Our findings reveal that more diverse boards do indeed behave differently from less diverse boards. However, they also show that having a more diverse board doesn’t necessarily lead to increased risk aversion.

I think the most relevant CG research topic for emerging markets now is…

…How to create a stronger talent development pipeline for women. This issue of gender is huge everywhere, in my opinion. But it’s even more critical in emerging markets, where they are faced with so many economic and social development challenges.

You want the best people - the best minds - working to address these things.  If talented women aren’t participating in the workforce, or aren’t advancing, that’s a big problem for these countries, because of what they are losing out on.  Of course, how to do this is the real challenge. And I’m not convinced that quotas are the answer.

What bothers me about the push to enact gender quota policies is that it’s an easy cop out…

…Dictating to companies that they have to put more women on their boards might yield more people, but that’s not to say that they will be the best appointments. Let’s look at what might happen in a country where family ownership is the dominant corporate structure - as is the case in many emerging markets.  If there’s a gender quota, these companies might put elderly aunts, or nieces, or sisters-in-law on the board. So, yes, they are compliant with the policy. But if the appointments are not merit-based, this could have a negative impact on company performance.

We really have to figure out the reasons WHY there aren’t as many women in top positions and address the root causes. For example, here in Australia, day care is really expensive. Many women have opted out of moving up the career trajectory because they aren’t earning enough to cover the cost of day care. If policy-makers really wanted to do something that would have an impact on increasing women’s participation in the workforce, they would take a look at that. There needs to be a deeper dive into the barriers that prevent women’s advancement.

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