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The effect of TMT feminization on
the firm's risk management
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Master Thesis Degree Project in General Management
Title: The effect of TMT feminization on the firm’s risk management Authors: Abolfazl Nazarifar & Alireza Seyedrezaei
Tutor: Tommaso Minola Date: 2020-05-17
Key terms: TMT, Feminization, Risk management, Decision-making process
Abstract Background:
To have a deeper and better understanding, about results of having women on the top management team and its effects on risk-taking process, and the outcomes of a diverse team, it is crucial to study the contrasting, characteristics and qualities of different genders (men and women), which imitate the dynamics of TMT. Extant literature shows these differences can be a result of work environment, social beliefs, or rooted in the gender itself. These differences can affect the decision-making process and subsequently, risk management in a firm. Purpose:
The purpose of this study is to investigate the effects of feminization on company risk management considering the differences in decision making between male and female managers. We believe by shedding light on effects of female on company’s performance, specifically risk management, we can provide top decision makers with better understanding of female capabilities. Subsequently, we believe our findings can help to recruiting more females on managerial positions and improvement of gender equality.
Method:
This is a case study conducted in a company that experienced a considerable change in its TMT gender combination. Qualitative data are gathered through interviews and secondary data are used to back up empirical findings. For the overall visualization of the study Coleman’s boat diagram is used.
Conclusion:
Finally, our findings support that companies with more females have more cash holding policy, higher sophistication in project selection, and more efficient R&D investments. Micro-level qualities in female managers regarding risk-taking, has resulted in better risk management in the company. Although there is a decrease in R&D investment during past few years, the company is still innovative.
3 Table of Contents
1 Introduction ... 6
1.1 Background ... 6
1.2 Purpose
... 7
1.3 RQS
... 7
1.4 Method
... 8
2 Theoretical background
... 8
2.1 General differences (micro-level)
... 8
2.2 Management style(micro-level)
... 9
2.3 Risk-taking behavior by different genders (micro-level)
... 10
2.4 Decision-making process (macro-level)
... 12
2.5 TMT combination and outcomes (macro-level)
... 13
2.6 Standards and Measures
... 15
2.7 Effect on CSR
... 16
2.8 Motivation behind hiring female managers
... 16
2.9 Obstacles for hiring female managers
... 17
3 Methodology
... 18
3.1 Research philosophy
... 18
3.2 Qualitative research approach
... 18
3.3 Samplings
... 19
3.4 Methods and Techniques for data collection
... 20
3.5 Quality assurance
... 20
3.5.1 Credibility ... 21
3.5.2 Dependability ... 21
3.5.3 confirmability ... 21
3.5.4 Transferability ... 21
3.6 Ethical consideration
... 22
4
4 Empirical findings
... 22
4.1 Macro-level findings ... 23
4.1.1 Risk-taking ... 24
4.1.2 performance ... 25
4.1.3 Innovativeness ... 27
4.2 Micro-level findings (individuals risk tendency)... 27
4.2.1 Financial risk-taking ... 28
4.2.2 managerial context risk-taking; accepting opportunities with
responsibility for failure ... 28
5 Analysis ... 29
5.1 Analysis methods
... 29
5.1.1 Coleman’s boat ... 30
5.1.2 Template analysis ... 30
5.1.3 Codes in relation to themes ... 31
5.2 Theme one, macro-level differences
... 33
5.2.1 Cash holding ... 33
5.2.2 R&D expenses ... 33
5.3 Theme two, micro-level differences between male and female
managers
... 34
5.3.1 Financial risk-taking ... 35
5.3.2 Professional opportunities and risk ... 35
5.4 Final analysis
... 36
5.4.1 Cash holding policy ... 37
5.4.2 Sophistication in project selection ... 37
5.4.3 Innovativeness ... 37
6 Conclusion ... 38
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7.1 Contribution
... 39
7.2 Managerial implications
... 40
7.3 Limitations
... 41
7.4 Suggestions for further studies
... 41
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1 Introduction
In this chapter a short background of the topic is provided. Followed by the purpose of our study and defining research problem. The research questions are also presented. After a brief explanation of the methodology, the overall design of the thesis is explained.
1.1 Background
In recent years, many studies have examined the effects of female holding leadership positions or their participation on the top management team (Loukil & Yousfi, 2015). Besides, new legislation in some countries forced the companies to have female participants on the board of directors (35-50 % of the board participant), which can have both negative and positive outcomes (Hillman, 2014; Bruna, Dang, Scotto & Ammari, 2019).
Gender diversity becomes an interesting subject for academics to conduct research, due to the uprising demand for equality and introduction of legislation for gender diversity in the board of directors or TMTs, and its consequences on firm performance and governance.
By reviewing the literature, it seems that there is a uniform approach toward gender diversity definition. Schwab et al. (2016) explain that “Gender is a demographic attribute that allows easy visual distinctions to be made and that for multiple social and biological reasons tends to be readily available for the creation of social categories”.
Above all, our main focuses are on, analyzing female participation on the TMT’s and its touches on the decision-making process, and how it can change the firm’s performances, outcomes, and governance by focusing on risk management view.
The decision-making process within the TMT can be affected by female participation in both negative and positive ways (Rossi, Hu & Foley, 2017). In general, female managers add positive advantages to firm performance and governance, and in particular, they change the TMT’s dynamics (Post, 2015). moreover, some researches have examined risk-aversion attitudes of female directors, and its effects on the firm’s risk-taking. (Bruna, Dang, Scotto & Ammari, 2019).
Although despite increasing female participation in the TMT, females are still underrepresented in the top management team. Though, if the constructive consequences and benefits of female participants on the organization’s outcome were revealed, they would be more eager to support, prompt, and recruit females into their TMT (Schwab, Werbel, Hofman & Henriques, 2016).
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In the following literature review, we tried to shed light on the effects of feminization in the TMT in the firm’s performance, by focusing on risk-taking, decision-making processes, and differences that could be achieved by the mentioned change.
Finally, despite conflicting findings of the effect of TMT feminization on firm risk-taking, most literature supports positive outcomes of feminization in the top management team. However, destructive perceptions toward female managers, and social or cultural barriers can be considered as speed bumps for women participation on the TMT or other high positions (Adams & Funk, 2012).
1.2 Purpose
The purpose of this study is to investigate the effects of feminization on company risk management considering the differences in decision making between male and female managers. To have a deeper and better understanding, about results of having women on the top management team and its effects on risk-taking process, and the outcomes of a diverse team, it is crucial to study the contrasting, characteristics and qualities of different genders (men and women), which imitate the dynamic of TMT.
By conducting a qualitative based research within companies that have had feminized their TMT, we try to shed light on the effects of feminization of the TMT on the risk-taking process. Since this topic is more concerned recently, and additionally in Sweden despite the underrepresentation of women, legislators look for other means for recruiting women than just by the force of the law, a study based in Sweden can be fruitful. Our purpose is to understand the effect of feminization within TMT and to find out if females are the ones who are accountable for conveying these qualities.
1.3 RQS
RQ1: What are the effects of TMT feminization on a firm's risk management at the macro level?
RQ2: What are the differences between male and female managers in risk-taking in the micro-level?
8 1.4 Method
By reviewing works of literature, most of them proposed a hypothesis, based on former theories and then they evaluated it, by collecting empirical data through the firm’s financial forms, surveys, and interviews.
As a preliminary design of our research, we consider focusing on companies that have had significantly changed in the combination of their TMT for the last 7 years, to determine the risk-taking level of that company based on feminization among their TMT. Gendered organization or firm is an organization in which emotion and action, disadvantage and advantage, identity and meaning, exploitation, and control are shaped through and in terms of differences among feminine and masculine values (Loukil & Yousfi, 2015). The measurements for evaluating risk-taking are according to the previous examination. (Bruna, Dang, Scotto & Ammari, 2019).
We consider focusing on only companies which have had significant changes in their top management team (TMT), by gathering information through open-ended interview, and questions about personal experiences and the changes they practiced through the years of working as directors. Besides, we have decided to measure the individual’s risk-aversion through the lottery test to demonstrate if the women in boards are personally more risk-averse as it is expected (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015; Adams & Funk, 2012).
2 Theoretical background
In this chapter a thorough literature review on the topic is conducted to provide theoretical background for our study. The differences between males and females stated in extant literature regarding decision making is presented. Followed by the effects of females in high managerial levels on company’s outcomes, and factors that can influence the decision-making process.
2.1 General differences (micro-level)
“Social role theory” explains that traditionally men have been tightened with agentic characters and women are connected with communal characters, which divide their behaviors into two distinct sections. Based on “Social role theory”, men have instrumental performances and typically they are comparatively more dominant, independent, assertive, risker, competitive, aggressive, and hard-hitting in comparison with the woman. On the other hand, women have expressive performances and typically they are caring, coordinative, emotional, and selfless, in their actions (LePine, Hollenbeck, Ilgen, Colquitt & Ellis, 2002).
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“Scwharts model” pointed out that stimulation, conformity, self-direction, security, achievement, tradition, hedonism, benevolence, power, and universalism, are personal values and ethics, which can be evaluated. Moreover, values are different around the globe due to cultural diversity, and also different values corresponding to a different gender, which leads us to separate values into two contradictory groups; masculine and feminine (Adams & Funk, 2012).
Above all, masculine characteristics are such as; self-enhancement containing hedonism, achievement and power, and openness to modification containing stimulation, hedonism, and self-direction. On the other hand, feminine characteristics are such as; self-transcendence, containing benevolence and universalism, and conservation containing conformity, tradition, and security (Adams & Funk, 2012). Besides, women with administrative positions, have more masculine values and characteristics (Adams & Funk, 2012).
According to Hillman, (2014) different genders(women and men) have big differences in their ethical consideration, and women make their decision more consciously than men, which provide them the ability to detect negative significances of their decision and it makes them able to have a more decent or ethical outcome, in comparison with men-only TMT.
In fact, by studying of women self-construal we get to the conclusion, that they are more interdependent and social than men, which explains the reason, that female in managerial position are more likely to ascertain a strong connection among their team by encouraging constructive communication, facilitating communication and backing the team final aims (Post, 2015).
2.2 Management style(micro-level)
According to Klenke, (2003) Power is the capacity and capability to influence or persuade, others to do something or act in a certain way. Also, by following usage of power among different genders (men and women), there is a noteworthy dissimilarity among them. Men usually have more willingness to concentrate on exploiting personal achievements, and on the other side, women usually use relational interaction. Additionally, female managers show more fairness, and focus on long term achievements, with less competitive attitudes (Apesteguia, Azmat & Iriberri, 2012).
Klenke, (2003) demonstrate that conflict management within a business atmosphere is a method to resolve problems and manage disagreements in a team by involving an effective way of communication and negotiation abilities. Men traditionally expected to be
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dependent, dominant, and behave assertively, and on the other side, women are more likely to act in a sympathetic, considerate, and cooperative way, due to traditional stereotypes. Also, the approach toward conflict management is different between women and men managers, and men usually follow their competitive instinct, while women act with a cooperative style. Post, (2015) explains the coordination requirements as a contextual factor to evaluate connection among; team structure and communication models within a team, and leader gender effects on team outcomes. furthermore, coordination is the key behind team management, and it is an essential factor for the management of big-sized, multicultural, and diverse teams that could be even geographically detached. Besides, women are more social than their men colleagues, which provides them with the ability to improve cooperative learning and the team’s unity.
Female managers, due to their values and characteristics have a superior potential to conclude with participative communication, stimulate cohesion and cooperative learning within their team. Additionally, support and appreciation of team member opinion, and facilitation of information distribution within group members, which provide a better environment for participants to communicate, is the outcome of managers (i.e., female leaders) with robust relational self-construal characteristics. Consequently, relational self-construal characteristics among female leaders can optimistically improve the participation of team members in the decision-making process (Post, 2015).
Notably, female managers' characteristics such as their wider inspection of problems can result in a superior foundation for the TMT’s to have an improved justification for their options toward their clients, contractors, stakeholders, and employees (Hillman, 2014).
Klenke, (2003) highlights that, while a male is less likely to manage conflict within their team due to their competitive attitudes, female supportive characteristics backing them to manage conflict in their team. Therefore, female attitudes toward conflict reduction, provide them assistance in the strategic decision-making process.
2.3 Risk-taking behavior by different genders (micro-level)
Another difference between men and women's characteristics, by considering the decision-making process is women's risk-aversion attitudes, which can negatively affect business performance (Rossi, Hu & Foley, 2017). Significantly, women risk aversion attitudes can affect business performance in a negative way (Cabrera-Fernández, Martínez-Jiménez & Hernández-Ortiz, 2016). On the other hand, the driving force behind the higher profit margin for an
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organization is risk-taking attitudes and behaviors (Apesteguia et al. (2012). However, women's risk-taking attitudes can variate, based on their working atmosphere or environment (Rossi, Hu & Foley, 2017). As an example, in Sweden women show more risk-taking attitudes, rather than their male colleagues (Adams & Funk, 2012).
In some countries (for instance Belgium, France, Norway, and Italy) there are quota laws legislated to push companies for hiring females on their board (Bruna, Dang, Scotto & Ammari, 2019). Two other factors that can push company through becoming more gender diverse is first, the public image of the company that can influence the market opportunities, second companies that bare working with public agencies have to follow the preferences of them which are toward more diverse firms (Loukil & Yousfi, 2015).
As an indirect influence of feminization in TMT, fewer large returns can be witnessed. On the other hand, huge losses are also rare after gender diversity increases (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015). This can be translated as firms with diversity take less risk, so the performance of the company is more stable (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015).
According to the “upper echelons” theory, the firm’s strategic changes are decided by its top management team. Therefore, TMT can critically influence the firm’s strategic plans, thus recruiting more women to bring a wider range of cognitive viewpoints. Consequently, the firm can recognize more strategic opportunities and handle upcoming environmental changes (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015). However, different researches have come up with conflicting results about the effect of gender diversity (Bruna, Dang, Scotto & Ammari, 2019).
According to Bruna et al. (2019) female engaged in financial companies are less risk-averse compared to the female which are occupied in other industries. The tendency towards risk is less in women comparing to men. This can be explained by feminine social beliefs, that expect women to favor more value judgment and risk consideration that can result in more precise decisions with less risk of failure (Bruna, Dang, Scotto & Ammari, 2019).
TMT feminization can advance risk management regarding the investments in R&D. that means by the presence of females in TMT, the positive relation between R&D expenses and future performance will be reduced. In other words, the vain expenses on R&D are reduced as women can bring more risk-aversion behaviors to the TMT decisions, and as a result, the cost of debts will be less failure (Bruna, Dang, Scotto & Ammari, 2019).
Accordingly, companies by moving from recruiting women as tokens toward adding active women directors, from “invisible minorities” toward “active minorities” can improve the
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innovation of the company with less unreturned costs (Bruna, Dang, Scotto & Ammari, 2019). TMT feminization can result in more cash holding policies that can reduce the amount of leverage of the firm (Loukil & Yousfi, 2015). This can be due to the risk-aversion attitudes of women participants in the TMT.
Contrary authors couldn’t find a magnificent effect when they investigated other measures of risk-taking like more R&D investments, investment opportunities, etc (Loukil & Yousfi, 2015). By considering the whole research, the authors concluded that by more women on board, under detailed conditions, the quality of the decision made by TMT will be increased (Loukil & Yousfi, 2015). Women's presence TMT is more important for rebuilding the company rather than just managing the financial situation.
Women tend to make riskier decisions, magnificently when they face more obstacles compared to their male counterparts. Risky decisions can result in the reduction of profitability and value of the firm. The more profitable the firm is, the temptation of the women managers for risk-taking is more, and can bring value loss in the long term. Therefore, investment in knowledge and firm capital has more effect on risk-taking compared to gender diversity (Loukil & Yousfi, 2015).
Finally, women’s risk-aversion is deeply rooted in stereotypes, perception of women’s, beliefs, and sex bias and there is no evidence for reduction of firm risk-taking and female representative on the TMT. The hypothesis of, the connection between firm risk-taking and female on the TMT, has not been backed by findings. Empirical studies shattered light to the fact that “single women exhibit relatively more risk aversion in financial decision making than single men” (Bruna, Dang, Scotto & Ammari, 2019).
2.4 Decision-making process (macro-level)
As reported by Niksen and Huse (2010), the involvement of female representatives on the board of directors will develop open debate on the board. Therefore, the development of unlike opinion to board discussion and open debate which can facilitate the decision-making process is due to female different experience from the marketplace, public service, community, and workplace (Terjesen, Sealy & Singh, 2009). Besides, providing new compassions that discover expression and bringing up new alarms in the discussion, is because of female supply of different outlooks to debates of the boards (Cabrera-Fernández, Martínez-Jiménez & Hernández-Ortiz, 2016).
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In decision-making and problem-solving processes, there are more dissimilarities among the team mean more viewpoints and wider perspectives that can result in a more precise and exact analysis of the problem (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015)Terjesen et al. (2009), explain that the enlightening of business supremacy is a result of developing diversity in the TMT. Therefore, evaluating the effects of gender diversity on the decision-making process in the TMT is a crucial aspect to have a better understanding of its consequences on a firm’s performance (Marinova, Plantenga & Remery, 2015).
Development in decision-making procedure is the outcome of equilibrium among knowledge, aptitudes, attitudes, and geniuses of contributors within the board of directors. Indeed, the enthusiasm of female directors within the board, drive them to impulsively bring up new questions and subject, which provide the opportunity for board members to develop their knowledge, perspective, conversation and strategy for the decision-making process (Rao & Tilt, 2015).
Also, repetition of the same faults is due to having a uniform group which has the same opinions, knowledge, and perspective (Cabrera-Fernández, Martínez-Jiménez & Hernández-Ortiz, 2016). On the other hand, a diverse TMT has a higher range of creative, effective, and innovative ideas, which provides them more alternative and unique thoughts because of their decision-making process, which is due to their extensive knowledge and viewpoint (Hillman, 2014).
However, broader knowledge, viewpoints, and experiences are not always an advantage for a decision-making team, and it could have destructive outcomes within diverse TMT, because of unlike background among the members, and it could significantly slow down decision-making process or even uphold it, due to uprising debates in the board of directors (Marinova, Plantenga & Remery, 2015).
Finally, by just adding female managers to the TMT, because of their gender and avoiding proper consideration of their qualifications, qualities, and experiences, it can affect the decision-making process and outcomes, negatively (Nielsen & Huse, 2010).
2.5 TMT combination and outcomes (macro-level)
Schwab et al. (2016) describe how firm outcomes can be affected by the level of gender diversity among the TMT. Besides, there is a general common agreement that gender diversity in the TMT, can have both positive and negative impacts on firm performance (Schwab, Werbel, Hofman & Henriques, 2016). Positive outcomes of gender diversity at the managerial
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level are associated with the noble decision-making process, due to different sources of information and knowledge that men and women bring to the table, because of their different experiences. Thus, gender diversity among board members could improve the decision-making quality and subsequently the firm performance.
Terjesen et al. (2009) pointed out that, high-status group members are not required to prove their competences, and on another hand, low-status group members need to bring more qualities to perceived as a participant with high qualities and capabilities. However, firm performance and group decision-making process progress, when female member reach a critical mass on the board of directors (Schwab, Werbel, Hofman & Henriques, 2016; Loukil & Yousfi, 2015; Hillman, 2014; Bruna, Dang, Scotto & Ammari, 2019; Apesteguia, Azmat & Iriberri, 2012; Terjesen, Sealy & Singh, 2009; Cabrera-Fernández, Martínez-Jiménez & Hernández-Ortiz, 2016; Rao & Tilt, 2015). In another word, female members of the TMT, show their real qualities and reach their full potential and develop the firm performance, when female participants in the TMT, reach beyond the tokenism.
LePine et al. (2002) found that, in the groups, where men are in majority, they performed badly, and in groups with a balance in gender composition or women-only groups, outcomes are more accurate and invariant. Besides, by increasing the number of female members, as it gets close to the equal number of male and female participation in TMT combination, it can lead to the negative performance of the TMT by creating in-group and out-group separation, or even communication difficulties arise among participants.
Moreover, feminization in administrative positions can develop firm outcomes and progress excellence of the decision-making process, due to a broader range of knowledge, expertise, information, attitudes, qualities, experience and background that both genders bring to the table (Schwab, Werbel, Hofman & Henriques, 2016). As a matter of fact, in engineering and scientific teams, it is more common to accept and identify team members by their knowledge, potential, and proficiency, unrelated to their gender (Joshi, 2014).
Loukil and Yousfi, (2015) state three other important effects of gender-diverse boards according to the research done on US-listed firms. As a result, female directors have better records of attendance compared to their male equals. Consequently, this leads to a better attendance record of men working with them. Finally, female have more willingness to join monitoring communities, that can significantly affect the monitoring policy and quality of the firm. Additionally, based on “agency theory”, the independence of the board can escalate the quality of decisions made by the board. By having gender diversity among board members, new perspectives can be brought to the board. Based on the “critical mass theory” since less
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than two women are still working as minorities, the minimum number of women in the board who can influence the board decision making effectively is more than three (Loukil & Yousfi, 2015).
On the other hand, gender diversity among the TMT can have destructive results in group dynamics and firm outcomes (Schwab, Werbel, Hofman & Henriques, 2016). As an example, TMT members could create in-group and out-group divisions, based on their gender and separate themselves into men and women groups, which can lead to lack of trust, contact, and communication, with the rise of conflict and disagreement among members (Schwab, Werbel, Hofman & Henriques, 2016). Furthermore, firm outcome downgrade because of changes in the combination of all-male TMT members, toward token participants of women among the top management team. Also, tokens members of the TMT (female) separate themselves from governing members of the team (male), and it can harm firms’ performance. Therefore, the dominant group of the TMT (male members), behave in a masculine way which leads to, information restraint from token (female) members of TMT.
Finally, findings show that the investment policy of the firm will be boosted by adding more women to the TMT which, results in the reduction of long-term debt and an increase in internal growth. The cash-holding effect of gender diversity is also influenced by the company board size. Since there are larger firms without any women in their board room, researchers conclude that cash-holding without considering the size of the company can be ambiguous (Loukil & Yousfi, 2015).
2.6 Standards and Measures
Women’s self-image is enormously get affected by their teammates' behaviors with them and it is an important parameter that can imitate women’s performance in the TMT. The recruitment process of women on TMT, affects their male collogues behavior with them. In another word, female participant of the TMT is treated differently, if insertions of them to the TMT has been done, based on their qualification and abilities, or some conditions such as government regulation and trends for hiring female managers put them among TMT members (Hillman, 2014). Consequently, insertion of women due to some condition except for their qualification can lead to tokenism or isolation of them by their male colleagues.
Besides, conflict among board members can occur, due to the insertion of the female manager to the TMT, because of external force or demand (Cabrera-Fernández, Martínez-Jiménez & Hernández-Ortiz, 2016). The external force for insertion of female to the managerial position,
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or cultural ethics that avoid emotional performance, can stop female to grasping their full potential and this can result to have a board of directors with female members, but with masculine attitudes (Terjesen, Sealy & Singh, 2009).
2.7 Effect on CSR
Corporate social responsibility policy of a company has to consider three important aspects: environmental, social, and economic. For ethics and CSR consideration a company has to reach justice in all of its fields from governance to practice (Bruna, Dang, Scotto & Ammari, 2019). According to the “CSR ISO,” there are 7 important topics that must be taken care of: “organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development”. One of the important approaches of CSR is the diversity that fits gender diversity in the middle. CSR rate of a company can bring a positive effect on the firm reputation, so a higher CSR rate means a higher quality of a company. Since gender diversity is one of the quality indicators of CSR approaches, so it can be concluded that gender diversity can raise the CSR rating that leads to a higher quality view of the company (Bruna, Dang, Scotto & Ammari, 2019). Research on US sample firms’ findings shows a noteworthy outcome of TMT feminization on corporate social responsibility and social performance of the firm (Loukil & Yousfi, 2015).
If the expectation of a woman manager for income is based on their women colleagues and not their man colleagues, it can be a sign of inequality in a corporation. A diverse TMT (top management team) can reduce the salary gap since there will be less difference between men and women's compensation. Gender diversity among the TMT does not only reduce the firm's risk, and also it can improve the firm's performance, by reduction of income gap at the top executive level (Baixauli-Soler, Belda-Ruiz & Sanchez-Marin, 2015).
2.8 Motivation behind hiring female managers
Male has more willingness to take risk than female (Loukil & Yousfi, 2015). In a professional environment, females have less willingness to make risky decisions and perform aggressively. Biological parameters such as genetic differences, or psychological and social reflection are behind differentiation between different gender (Loukil & Yousfi, 2015).
For instance, some findings show that men are more confident and competitive than their female counterparts (Loukil & Yousfi, 2015). These distinctions in case of confidence and certainty among people are described to an enormous degree by the workplace in the firm and
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whether their colleagues are female or male. However, proficiency and experience in the work environment can reduce dissimilarity in risk perception, among female directors (Loukil & Yousfi, 2015).
Differences in performance among women and men can be described by cultural and social gender norms (Klenke, 2003). Different parameters such as mass media, family, school, cultural or religion-related factors regularly shape and reproducing expectations regarding roles of different gender in society. Therefore, gender is a socially created group, which replicates the description of masculine and feminine values, within a culture (Loukil & Yousfi, 2015). In conclusion, female managers are dissimilar to their male counter, because of their “demographic traits and human and social capital” and not due to their physical difference (Adam & Funk, 2012).
2.9 Obstacles for hiring female managers
Women’s self-image downgrades their qualities such as self-reliance and motivation, management abilities such as capabilities to have an impact on other and confidence, and related education or proficiency compared to their men colleagues (Loukil & Yousfi, 2015). Sometimes, organizations face a condition to recruit a female to the TMT, who is chosen by the owner or due to their political connection, to strengthen the owner’s verdict and strategy (Loukil & Yousfi, 2015). To handle the environment uncertainty, politically inserted women to the TMT, try to expand their network and connection.
Politically connected women on the TMT can get more funds to the firms and have more investment opportunities, in comparison with firms without women participants on the TMT (Loukil & Yousfi, 2015). Besides, politically connected women or related to funder have a positive effect on cash policy and investment opportunities using the connections they have. In recent years gender gap among managerial positions in well-developed countries is disappearing (Klenke, 2003). Inequality for women managers causes less political savvy, which leads them to be more exposed to social media if they accomplish something in an immoral or corrupt way. As a consequence, female managers have less willingness to petitioning, lobbying, and hiding information to self-serving than their male counterparts (Klenke, 2003).
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3 Methodology
In this chapter, we will go through the methodology which has been followed for this research. First, the philosophy, strategy, and method of the research will be explained. Then the data collection and methods used for analyzing gathered data. Finally, research quality assurance for this study will be discussed.
3.1 Research philosophy
The viewpoints of the author about the way data about a fact should be collected, examined and used, is the philosophy of the research and it helps to recognize how the author observes the situation and give us more knowledge about the ground of research (Easterby-Smith, Thorpe, Jackson & Jaspersen, 2018). Ontology and epistemology are two main sections of a study, in which ontology stands as the core of the study, and then epistemology is the surroundings. The philosophical expectation of the author about the nature of facts and the researcher's point of view toward reality is called ontology. The ways of gaining the nature of the world are called epistemology. Epistemology is divided into two viewpoints; Positivism & Constructionism. Social constructionism considers the reality by the individual perspective rather than objective, and the way that individual observes the world (Easterby-Smith, Thorpe, Jackson & Jaspersen, 2018).
Relativism is the ontology of this study because we believe that reality is based on the observer's perception about the ongoing situation and it could vary from person to person, even if they are dealing with the same situation. So, we consider conducting interviews to reach a better understanding of what are the differences between men and women in risk-taking, and we need to interview different managers in the same company, which are dealing with different objects, to have a better and deeper understanding of the ongoing situation.
Besides, social constructionist is our approach toward this research, due to the reason that we believe human development is socially situated and knowledge is constructed through interaction with others.
3.2 Qualitative research approach
According to Easterby-Smith et al. (2018), for considering the overall approach of research following items must be considered:
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Role of theory: the theory is cautiously reflected in the research. We consider by gathering qualitative information help to enrich the literature around women's risk-taking behavior in top management teams.
Starting point: the starting point in this study is to focus on the conflicting literature around women managers and their risk-aversion attitude. We want to shed light on this area by conducting qualitative research on the effect of TMT feminization on the firm’s risk management at a macro level, and also investigating the micro-level qualities in a woman that can lead to the effect on risk-taking behavior of the whole firm.
Data: we consider doing qualitative research, by conducting interviews, observation, and analyzing documents to be sure about the findings. Our data mostly is textual. Plus, for the performance part, we consider using financial statements of the firms as secondary data. Goal: The outcome of our paper is a theory to describe the effect of TMT feminization on firm risk-taking process and micro-foundations around the risk behaviors of female managers. Researcher role: we conducted semi-structured interviews. Thus, the role of us is actively affecting our findings. Subsequently, we conducted semi-structured interviews and open-ended questions. These can demonstrate that the study is researcher dependent.
By considering the factors stated above, this study is qualitative research, in proportion to the inductive research approach and data which come from a case study. Inductive research method starts from gathering data and when a suitable amount of data has been collected, then it moves toward the formulation of a practicable theory (Ketokivi & Mantere, 2010). The collection of data related to the topic of the study is the features of an inductive research method.
3.3 Samplings
To investigate the effect of TMT feminization, a company that had a considerable change in its top management team gender combination, has been selected. We can claim that changes in this company's risk-management are concerning the change in its TMT feminization. Besides, researching in Sweden can help us to avoid typical stereotypes or government pressures on companies affecting the risk behaviors of females. In Sweden the culture is based on gender equality, they have higher equality regarding gender compared to the US or Asian countries. Also, the contextual environment is still taken into consideration as no country has reached to complete gender equality. We consider the situations and contexts affecting women's risk behaviors, as it should be in a relativism viewpoint. Relatively pure micro-foundations that are
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not related to social pressures or other factors on women, could be outcomes of these properties.
3.4 Methods and Techniques for data collection
The collection of appropriate data related to the study purpose is one of the most important steps of each study (Easterby-Smith, Thorpe, Jackson & Jaspersen, 2018). On the other hand, the collection of incorrect data can lead to faulty outcomes. Therefore, it is important to collect the correlated data to the study, by following the study questions to avoid unnecessary data analyzing which is energy and time taking. Besides, proper data collection techniques, increase the value of the research. The quantity of collected data must be adequate that the result of the research can be generalized. In other words, the study must get to the saturation point by the proportion of the gathered data, that by adding new data to the study no new themes could be found.
Gathering different and diverse data for research can develop the novelty and excellence of the
research outcome (De Massis & Kotlar, 2014). Different methods of data collection have been used in this study. Primary empirical data was collected through interviews with managers within the same company. secondary data was collected through the company archival data and reports. For gathering data related to micro-foundations, an interview with the open-ended questions has been designed and conducted. Snowball technic has been used, by asking the participant to introduce other potential candidates for the interview, which could provide more related data and have a better and deeper understanding of the ongoing situation.
3.5 Quality assurance
In this study, the author aims to gather, present, and analyze the data in a trusty way. To have a reliable study with novelty, four principles of Credibility, dependability, confirmability, and transferability which has been established by Guba, (1981) were tracked through this study. Also, to be sure about the novelty and quality of published literature review in this paper, all of the articles have been selected carefully from peer-reviewed journals of ABS-list (Cremer, Laing, Galliers, & Kiem, 2015). Finally, those followed criteria which have been established by Guba, (1981) will be discussed.
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The procedure of finding the scope of the problem called the credibility of the study (Guba, 1981). Also, the credibility can be affected positively, by an extended engagement with the study subject. To have a complete view of the subject, document analyze, and interviews have been gathered. Besides, interviewing different managers in the same company provided a wider point of view and made the study more credible. Also, the only official published data of the company have been considered as a trustworthy source of the document. Finally, the theoretical framework of the study has been constructed, based on themes and key points found in the literature. It is believed that the analysis of collected data is not biased or complicated, so by eyes of another observer same findings must be achievable.
3.5.2 Dependability
Presentation of reasonable and appropriate results, which can be repeated in other words is due to dependability in the study (Guba, 1981). In this study, dependability has been practiced by a description of the process in a clear way which can be monitored by the reader. Also, the selection of the company and the interviews has been done carefully to full fill the mentioned criteria. Interviewing both genders to collect information regarding unlike perceptions towards women, both from their male counterparts and women themselves. Finally, the selection of methodology was based on achieving the best out of this study.
3.5.3 confirmability
To what extend a study has been conducted impartially, and if the same results can be concluded by another researcher, it shows the degree of confirmability (Guba, 1981). Confirmability is a checkpoint to avoid bias in the study. Personal opinions or unprofessional analyses were not taken into this study, to be in line with confirmability.
3.5.4 Transferability
Possibility of transmitting outcomes of the study to an alternative framework called transferability (Guba, 1981). Through this paper, we have made a clear explanation of each stage to allow generalization of the findings. By explaining the methodology and research process in this paper from the very beginning of this study, transferability has been considered carefully.
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Since the study is conducted in Sweden, it might be some differences in findings from country to country, which have dissimilar cultures and creeds. As we know lots of different parameters can form the personality of the female within a society, and those parameters can form perception toward female members of that society. However, the goal of our study is to find major differences in men and women regardless of their cultural background. Consequently, our findings can be generalized for other countries as well. Since, this study focus is on the risk-taking behaviors rooted in general dissimilarities between men and women, not the ones created by culture and local stereotypes.
3.6 Ethical consideration
Research ethics is consisting of guarding research participants and honor of the research group (Easterby-Smith, Thorpe, Jackson & Jaspersen, 2018). In other words, the author is responsible for safeguarding the participants and the research group from any harm and consider the participant's dignity. By avoiding dishonesty, declaring affiliation, and providing proper information about the research aim and, approval of participants for publication of findings, honestly, transparency and finally avoiding false report.
All of the mentioned ethical aspects have been considered carefully in the procedure of the interviews.
To avoid uncertainty, the purposes of the study and the goals were briefly described to the interviewees. Also, the interview questions have been sent in advance to avoid ambiguity for participants. The interviewee has had the right to withdraw from the interview at any time. Besides, the name of the company and participants and their position in the company will be kept anonymous to secure their privacy due to the sensitivity of the topic.
The ethical implications of this study are to inform the companies to prompt gender equality within their employees and raise even opportunities for women to make into top management positions.
4 Empirical findings
In this chapters our findings from the interviews and annual reports of the companies are presented. First overall findings under the two main parts of our study are presented, macro-level influences on company’s risk management and micro-macro-level differences between male and female managers. Our findings are presented in the order of our interview questions.
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Our interview questions are designed to measure both individual preferences regarding risk-taking, and the whole company behavior on what decisions they have made during the last 10 to 15 years. In the individual level (micro-level research) our questions are designed to investigate the risk-taking tendency of a person in different aspects suggested by the literature. Our questions are inspired by two earlier research done regarding risk and gender, Simmons (2008), and Gupta et al. (2009). According to literature, three types of risk decisions can happen to a person, financial allocation risks, sports activities risk, and managerial context risk-taking (gender and risk: women, risk-taking and risk aversion). We ignored the sports activities because that seems to be irrelevant. Our questions are open-end questions so although there are some numbers to help interviewees to impress their desire about the specific issue, saying an adequate number is not needed. Thus, they impress their opinion and describe the issues they consider before making the decision, and finally if they wanted to, they can answer with the exact number. For instance, the first question is a typical gambling question, that asks if they win 1 million SEK in the lottery and then they face a suggestion from an unknown bank for an investment, how much of their money they will invest in that bank. Some participants answered with some numbers and the others were keen to investigate the bank.
Our empirical findings are mainly based on two types of data. Qualitative data retrieved from 12 interviews conducted from managers in a company active in the chemical industry. Plus, quantitative information from secondary sources of data as statistics website and firm’s financial statements. The following information regarding each category in our research is illustrated.
In general, there are no laws sat by the Swedish government forcing companies to hire a specific percentage or number of women in their management team. Although there are some motivations are made by different worker’s unions to hire an equal number of males and females as the workforce. During interviews, none of our interviewees was hired considering some gender preferences by the company.
4.1 Macro-level findings (company as a whole)
our interview questions in this section are related to the following titles. Risk-taking (adopted from Covin and Slevin, 1989) performance (adopted from Wiklund and shepherd, 2003) and innovativeness. All these aspects of business can be affected by the tendency of the company regarding how much risk they want to take.
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4.1.1 Risk-taking (adopted from Wiklund and shepherd, 2003)
According to the data received by interviewees, the company prefers to invest in low-risk projects. That means the projects that return on investment are relatively lower, but the risk of losing is considerably low as well. It is worth mentioning that more than the amount of return, it is the security of yield that matters. This firm is more interested in investments that they can provide almost complete research about to be sure about the outcome relatively.
In the following, we asked about the environment of the industry, if that requires fearless and powerful measures to achieve the company’s objectives or not. Almost all managers agreed that the chemical color industry is such that it is better to explore situations and context more carefully and gradually to achieve the objectives. Taking uncertain decisions in this industry can result in a loss of trust from whole buyers and consuming industries like marine and car industry. Thus, the research facilities in this company are proactive and decisive. Next, we asked how the company reacts to unsure decision-making situations, either the company will take up an aggressive fearless position or the policy is to follow a “wait-and-see” position to minimize the risk of making costly mistakes. Answers from managers to these questions varied from not so slow to not so aggressive. The policy of the company is to consider changes in the industry and being prepaid for unpredicted changes, nevertheless in the conditions with uncertainty company will react in the most secure possible way. “Waiting for competitors to see how they react is sending signals to customers that we are not reliable,” said one of the participants.
Another question of ours in this sector was related to changes in the behavior of the company during the time. all of our interviewees have been working for the company for at least 10 years. The oldest manager we interviewed has been working in the company for 30 years. The answers to the question: “Tendency of the company regarding making riskier decisions has been raising or decreasing during the last 10 years? What are your motives for these answers?” were generally pointing out that the company is becoming more secure and risk-averse year by year. Although managers in R&D and production believe that they are producing more products and services every year, still the products are well investigated from the first, meaning that customers are waiting for the exact product. Thus, the company is making less risky decisions, but it does not mean that they are not improving.
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4.1.2 performance (adopted from Wiklund and shepherd, 2003)
For understanding the current performance of the company, we asked our participants to evaluate the following items of the company compared to their main competitors in the past three years. Net profit (i.e., sales minus operational costs), growth of the company’s value, cash flow, and development of sale. For supporting the information received by interviewees regarding net profit and cash flow we also checked the financial statements of the firm and competitors. For the selection of main competitors, we asked managers what companies can be considered as competitors. We chose 2 local competitors and 2 international competitors to investigate. In the following graph, the net profit and cash flow of all 5 companies are illustrated.
Figure 1
Regarding the net profit, there is no considerable difference between the company and competitors. Though most participants believe that the company has slightly better income compared to local competitors and they are performing better, not all mangers agree on this. The financial sheets show that all competitors are performing relatively close and net profit is slightly improving overall. The slope for Sherwin Williams company seems to be more promising. But still, the company is doing average regarding net profit.
979 970 832 6,674 539 0 1000 2000 3000 4000 5000 6000 7000 8000 2015 2016 2017 2018 2019
net profit (€ millions)
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Figure 2
There were interesting findings of cash flow. It is also noticeable in graphs that holding cash in the company is higher than all other competitors. This cash holding policy has been a negative point in the shareholder’s eye before the Covid-19 outbreak crisis. According to participants they had meetings to participate in more investments than keeping the cash. “happily, we did not lose all of our cash power before facing this corona crisis” Said one of the managers. The company’s managers believe that the value of the company is increasing in recent years. The brand is becoming more known as a high-quality producer in the market. The firm is known to present high-quality colors with innovative new products each year. Accordingly, they are not only known by the high quality of products but also known as a sustainable company. the final question in this part was about the development of sales. As a new strategy in the past 5 years, the company started to work with fewer customers. They adopted a more focused on high-value whole buyers and industrial companies to be able to raise the prices and quality of products. These new prices are not easy for any customer to purchase their product. Despite the decrease in the number of sales, the income of the company shows a solid raise in the past 5 years.
-1000 -500 0 500 1000 1500 2000 2500 3000 2015 2016 2017 2018 2019
Cash flow(€ millions)
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4.1.3 Innovativeness (adapted from Covin & Slevin, 1989)
According to (Entrepreneurial Orientation, Risk-Taking, and Performance in Family Firms) innovativeness of the company can be adversely affected by risk aversion in firm decision making. The logic behind this claim is females are more risk-averse compared to men, and investing in innovation activities can be considered risky. Three questions in our interview were designed to measure the innovativeness of the company. Emphasize of the company is on its basic products. Although presenting new products and services is taken seriously in company policy, but the business relies on its basic product. Innovative products are strongly advertised to show proactiveness of the company, but still, it takes time for a new product to become one of the main sellers. There is a noticeable stable decrease in R&D expenses during recent years according to the company's annual reports.
Figure 3
4.2 Micro-level findings (individuals risk tendency)
Our interview questions in this section are divided into three main parts. First, questions aiming to study an individual’s financial risk-taking. Our questions in this part are designed according to Simmons's 2008 Gender and Risk Survey and database. Second, interviewees are asked to reflect on hypothetical business/professional opportunities or positions offered to them. Success is not assured in case the accept the challenge and they have to accept responsibility for probable failures (inspired by Schein, 1990; Waldrop and Butler, 2000; Shapiro et al., 2009). Followed by questions that are designed to rate the five professional/non-professional
0 50 100 150 200 250 300 350 400 2012 2013 2014 2015 2016 2017 2018 2019
R&D expense (€ millions)
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sources that can affect a person’s decision making: power, self-efficacy (a person’s belief in her or his ability to succeed), professional network, family and friend network, organizational culture. The very last question is for a person to reflect if they had treated differently due to their gender.
4.2.1 Financial risk-taking (adopted from Simmons 2008)
Our findings were that women have less enthusiasm to invest the lottery money in the bank, as it was expected from the literature. It is worth mentioning that all female participants mentioned that they will do some research before making any investment, in contrast only one of the male participants asked if he can do some research to be sure about the trustworthiness of the bank. In the second question in this part, we asked about their preferences about risky investments. Similar to the first questions men tend to invest in riskier opportunities with less chance of return but with a higher amount of money. According to our observation, taking a risk in investment is relatively accepted which is a masculine quality, according to our participants’ answers.
4.2.2 managerial context risk-taking; accepting opportunities with responsibility for failure (Schein, 1990; Waldrop and Butler, 2000; Shapiro et al., 2009)
In general, our male participants will accept opportunities easier compared to their female collogues. In the following, we compare men and women about if they accept different types of business/professional opportunities one by one. Major investment decisions for business: both men and women managers that we interviewed are relatively interested in accepting major investment responsibility. Men are slightly more interested in these kinds of opportunities compared to their female equals. Major business development opportunity: in this item also both men and women are interested to accept the responsibility. Major change initiative: similar to the last two, both genders were interested to accept these types of opportunities. 3 of our female participants mentioned that they already have long-term solutions in their minds if they get the chance of being responsible for the major change initiative. Major funding agenda: interestingly men are more enthusiastic about these kinds of positions. “being responsible for funding in different projects and sections requires a high effort to consider all aspects of their jobs. It is too much stress and pressure.” Said one of our female participants. Major business relationship: women are more concerned about accepting partnership responsibilities. All male participants answered this question without enthusiasm about accepting the position, but some
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female managers answered they will be happy to get the position to build relations with other companies.
The next part of our questions is intended to find out to what extend each source of potential input can affect a person’s decision making (professional and non-professional). Power: The power of position offered is more important to female managers compared to their male colleagues. “more the power of position, more influence the person can make.” Said one of the female interviewees. Self-efficacy: is strongly important for women. According to our female interviewees, it is essential to believe in yourself that you are the right choice for that position or for making that decision. In contrast one of our male participants said:” if they asked me for this opportunity, they know that I am a suitable person for that position”. Professional network: For men, it is to some extent more important to have a relevant professional network for accepting the position. One of the female managers mentioned that it is not impossible to build the network after accepting the position. Family and friend network: this potential source seems to be less effective compared to other sources. Both for men and women it almost has the same importance. Organizational culture: is one of the most important sources that play a role in the decision of individuals. All managers agree that the message conveyed by the company as a whole can motivate a person either to accept the position or push her away.
We put the last question in our interview to see if there are any feelings about being treated differently in the workplace as a manager. None of our interviewees did experience any behavior resulted from their gender. For instance, one of our interviewees is transgender, and she says she feels more comfortable in the workplace compared to any other community.
5 Analysis
The analysis of our empirical findings is presented in this chapter. The visualization of our analysis is following Coleman’s diagram. The analysis is based on the theoretical background and enriches the literature regarding the differences between male and female managers regarding risk-taking and links these micro-level differences to macro-level outcomes on company’s risk management.
5.1 Analysis methods
In this part, different methods used for analyzing the data in this paper are explained. We are following the Coleman boat diagram for visualizing the design of our research. For the
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qualitative data analysis, we chose template analysis. The reason for choosing this method is we have some pre-established themes in our interview design.
5.1.1 Coleman’s boat
To visualize our theory, we decided to follow Coleman's boat diagram. Coleman's boat or bathtub is a popular representation of micro-macro level challenges. At first, it was used mostly for the sociological challenges but later it was also utilized in economic debates. (Ylikosk, Petri, 2016). Thus, our research is divided into two main themes, first, the macro or macro-level outcomes of management feminization (regarding risk management of the company), followed by the micro-level differences in male and female managers regarding risk in the decision-making process. Finally, as the contribution of our study, we tried to relate the macro-level outcomes to micro-macro-level differences. The following Coleman boat diagram is to visualize the path we decided to walk through for our study.
Figure 4
In this diagram the answer to our first research question: "Investigation of the effect of TMT feminization on firm risk-taking. (macro-level outcomes)" can be found under the theme of macro-level findings. Answer to our second research question “What are the differences in risk-taking behavior between male and female managers? (micro-level factors)" can be found under the block micro-level differences. And the relation between these two themes together is the answer to our third research question: “How micro-level differences are related to macro-level outcomes?”.
5.1.2 Template analysis
Template analysis is a particular way of analyzing qualitative data through different themes. This type of analysis is usually used for studying textual kinds of data like interview transcripts.
TMT feminization Macro-level Firm’s risk management behaviors
Micro-level differences between male and female managers in decision making
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Analysis always starts with initial coding found through keywords in interviews to identify themes related to the analysis. However, some of these codes may be modified or dispensed after considering the actual data obtained from the rest of the interviews. These prior themes are there to help us understand our findings and relate them easier to the topic. After identifying these prior themes, the first step is to read through the transcript of all interviews we conducted. Considering the data that can be answers to our research questions, after finding codes we categorize them into the prior themes categorized earlier. If there is a need to form a new theme(s) for grouping new codes that cannot be grouped in the prior themes, we define a new theme(s) needed. Finally, after revising and coding all interview transcripts, considering the themes we found we start to analyze our findings (King, N.,1998). It is worth mentioning that we followed this path in two main overall themes that we divided our data from the first, micro-level differences and macro-micro-level effects. The diagram in the following is to demonstrate the path we used for our analysis.
*In case there are more codes identified.
Figure 5
5.1.3 Codes in relation to themes
In total 11 interviews conducted through Skype Business. Each took an average of 40 minutes to conduct. We asked our open-end questions from 6 females, 4 males, and one transgender manager. All the interviews were recorded and transcribed for easier investigation afterward. Totally 2 main themes were considered in advance retrieved from literature, micro-level differences, and macro-level outcomes. After identification of 9 main codes, we added 4
sub-Interview transcription
Reading through interviews
coding
Categorizing codes into themes
analysis *
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themes. 2 sub-themes for each one of our major themes. The codes we identified from the interviews regarding the macro-level effect of TMT feminization were: sophisticated project selection, cautious reaction to changes in the market, focused sales strategy, the emphasis of marketing on new products despite the sales are based on existing bestsellers, innovativeness of the company. We categorized these codes into two main subthemes: Cash holding and R&D investment decisions. In the other part of our interviews regarding micro-level differences between male and female managers we identified these codes: a tendency towards secure returns, females are more strategic oriented than financial aspects, less dependency on connection more relationship building orientation, and no different perception from the company environment. For the better understanding of the relation between our themes and codes the following diagram is prepared:
Figure 6
Management team feminization
Macro-level outcomes on risk-taking Micro-level differences between male and female managers
Main themes
Cash holding R&D investments Financial risk-taking Professional opportunities risk - Sophisticate project selection. - Cautious reaction to market change. - Focused strategy. - The emphasis of marketing on new products - Sales based on existing best sellers. - Reduction of budget - Secure returns tendency in females. - Low priority on financial returns in females. - Less pendency on personal links in females. - Relation building orientation in females. - Gender equality. Subthemes Codes
