Examining the impact of gender power and gender diversity within the top management team on firm performance and firm risk

Purpose - This study moves beyond existing research on gender diversity to define a new construct – gender power. The study examines gender power within the top management team (TMT) and its relationship to firm performance and firm risk. Design/methodology/approach - The study utilizes a cross-disciplinary combination of upper echelons theory and finance theory as a framework to further examine the impact of gender power within the TMT and its impact on firm risk and firm performance. Employing data collected for 2,570 American publicly traded small-, medium- and large-cap firms over a 20-year period, panel regression analyses were conducted for measures of firm risk and firm performance, beta and return on assets (ROA), respectively. Findings - This study shows that gender diversity and gender power are two distinct constructs with different effects. The findings from this study suggest that gender power may be a stronger predictor of the relationship between firm performance and firm risk than simply gender diversity alone. Research limitations/implications - This study was conducted based on a sample of publicly traded firms. These relationships may not be generalizable to firms in other contexts. Further, other variables representing firm performance and firm risk may add to this research. Practical implications - Understanding the differences between gender diversity and gender power may allow firms to make more informed decisions when adding female executives to their TMTs. Originality/value - This study proposes an objective representational indicator of structural power to measure the relative power of female executives of public companies that allows the expansion of existing research examining the distinction between gender diversity and gender power and their relationship to firm risk and firm performance.