The impact and necessity of gender diversification on and in corporations and their risk-taking and decision-making is a large matter of public interest. Just like in the academic literature, no clear answer to the question of how gender affects corporate financial decision-making and risk-taking can be found in public. Furthermore, previous literature does not consider the impact of the financial crisis 2007/08. Therefore, this article aims at answering this question by reviewing literature and conducting a case study, in which EasyJet and Ryanair are investigated as well as the impact of the financial crisis and its influence on financial decision making and risk taking. Findings are that a female CEO does improve overall risk taking, but not in all aspects.
Table of Contents
1 Introduction
2 Literature Review
3 Case Study
4 Conclusion
Objectives & Topics
This essay examines the impact of gender on corporate financial decisions and risk-taking behavior by conducting a case study of EasyJet, specifically analyzing the period surrounding the company's transition to a female CEO in 2010 in comparison to its peer, Ryanair.
- Analysis of corporate financial decisions and risk management strategies.
- Evaluation of the influence of CEO gender on financial performance metrics.
- Comparative analysis of EasyJet (transitioning CEO) and Ryanair (constant CEO).
- Investigation of the financial crisis (2007/2008) impact on corporate decision-making.
- Assessment of stock market performance, including Beta and standard deviation.
Extract from the Book
3 Case Study
EasyJet has been chosen as the company with a transition from male to female CEO. The transition took place in July 2010 and hence enough time for change after the transition is given. The peer company is Ryanair. It has its male CEO since 1994 and both companies operate in the budget airline market. Ryanair as well as EasyJet only operate the European market, but EasyJet is based in the UK and Ryanair in Ireland. Still, as both have an identical market, it is a good pair for comparison to filter out external factors.
The case study is set up to find correlations between two main points. It compares EasyJet with itself before and after the transition from male to female CEO. Then it has a look at how EasyJet has performed in comparison to its peer Ryanair as well as to the market, which is the FTSE 350, to calculate Beta. The comparison to its peer is necessary to make sure that external factors like the financial crisis in 2007/2008 are not the only reasons for a better or worse risk taking. The approach used is similar to Faccio, Marchica and Mura (2016).
The data has been collected for the years 2005 to 2015 in order to grasp the same time frame before and after the transition and has been taken of Bloomberg. The data needed for this case study involves operating income, sales, interest expenses, long-term debt, equity, total assets, number of outstanding shares as well as the share price or index development for both companies and the FTSE 350. Besides that, it includes data from before and after the financial crisis to show general effects of the crisis and its outcome (see Appendices 8 - 14).
Summary of Chapters
1 Introduction: This chapter provides the research context, outlining the lack of consensus in existing literature regarding gender's impact on corporate decisions and defining the goal of using updated data through a comparative case study.
2 Literature Review: This section synthesizes existing research on the relationship between CEO gender, risk-taking, and financial performance, highlighting conflicting findings based on differing methodologies and timeframes.
3 Case Study: This chapter details the research design, comparing financial ratios and stock market performance metrics of EasyJet and Ryanair before and after EasyJet's CEO transition in 2010.
4 Conclusion: This section summarizes the study's findings, noting that while there is an overall improvement in financial decision-making under the female CEO, results are mixed, suggesting that gender impact is not uniform across all financial aspects.
Keywords
Corporate Finance, Gender, CEO, Risk-Taking, EasyJet, Ryanair, Financial Decisions, Return on Assets, Capital Gearing, Income Gearing, Beta, Share Price, Financial Crisis, Performance Analysis, Management.
Frequently Asked Questions
What is the core focus of this research paper?
The paper investigates whether the gender of a Chief Executive Officer (CEO) influences corporate financial decision-making and risk-taking behavior in large corporations.
What are the primary thematic areas covered?
The research covers corporate governance, financial risk assessment, executive leadership, and the impact of external economic events like the 2007/2008 financial crisis on firm behavior.
What is the main objective or research question?
The main goal is to clarify the effect of gender on financial decision-making by analyzing more recent data (up to 2015) than previous academic studies, specifically filling the research gap regarding post-financial-crisis performance.
Which scientific method is utilized in this work?
The author employs a comparative case study method, utilizing quantitative data—including financial ratios, regressions, and performance averages—derived from Bloomberg to analyze EasyJet's performance relative to its peer, Ryanair.
What topics are discussed in the main body?
The main body examines literature on gender and finance, details the methodology of the case study, performs an empirical analysis of various financial ratios, and interprets the results in the context of previous studies.
Which keywords characterize this paper?
Key terms include Corporate Finance, CEO Gender, Risk-Taking, Financial Ratios, EasyJet, Ryanair, and Financial Performance.
Why was EasyJet specifically chosen for the case study?
EasyJet was selected because it underwent a notable transition from a male to a female CEO in 2010, providing a clear event-based timeline to analyze performance changes.
How does the author account for external factors like the financial crisis?
To isolate the impact of CEO gender from macroeconomic shocks, the author uses Ryanair as a control group, assuming that as a competitor in the same market, it would experience similar external economic pressures.
What is the significance of the "Capital Gearing" metric in this study?
Capital Gearing is used as a specific measurement for risk-taking and capital structure, helping the author assess how the CEO influences the company's reliance on debt versus equity.
What conclusion does the author draw regarding the impact of the female CEO?
The author concludes that while financial decision-making overall appears to improve under the female CEO, the results are nuanced and not universally positive across every measured financial metric.
- Arbeit zitieren
- Johannes Laake (Autor:in), 2016, How does gender affect corporate financial decisions and risk taking?, München, GRIN Verlag, https://www.grin.com/document/364716
