Sea Change

Based on research by Yan Anthea Zhang and Hongyan Qu

• A change in CEO gender amplifies disruption inherent in the leadership change process.
• These outcomes don’t reflect on personal performance.
• Having other women in leadership positions – on the board, in top management – reduces the disruption in the status quo.

You've got to put yourself in the newcomer's shoes. You're the first female CEO at your firm. You beat all your fellow competitors from outside, plus everyone inside company ranks. And you got your job on the merits, at a corporation without one other woman in upper management or on the board of directors.

After blasting through such barriers, you'd be forgiven for thinking any future obstacles would be just as manageable. But a study co-authored by Yan Anthea Zhang, a strategy professor at Rice Business, and Hongyan Qu, an assistant professor at the Central University of Finance and Economics, suggests otherwise. The unique research on gender and CEO succession in China showed that when a female CEO succeeded a male CEO, it amplified the disruption inherent to the corporate leadership change process. That disruption correlated to lower performance for the company.

Furthermore, the authors found, in any succession with gender change, male-to-female or female-to-male, chances rose that the new CEO would make an early exit.

Strikingly, these outcomes didn't reflect a difference in male and female CEOs' performance. Men and women do seem to lead differently: Male executives, one study showed, made more acquisitions and issued greater debts; female executives placed wider ranges on earnings estimates and exercised stock options earlier than men.

But there is no clear evidence of a difference in male and female CEOs’ performance. And in Zhang's study, the gender of a new CEO alone, if not considered alongside the predecessor’s gender, had no impact on either company performance or the likelihood the newcomer would leave early.

Instead, lower company performance after a male-to-female succession was linked to disruption of the status quo – that is, the predecessor CEO’s leadership style. Hiring a CEO from within, they found, markedly softened the disruption of a male-to-female succession.

Grooming other female leaders also made a difference. In firms with women already in top management or on the board of directors, the negative impact of a male-to-female CEO change on company performance dropped. And the presence of top-echelon women leaders entirely eliminated the higher chance that the new CEO, if female, would leave early. The more common it becomes to see a woman in power, in other words, the less disruptive a male-to-female CEO succession becomes to the whole company.

But how much does a study of companies in China tell about workplaces in the United States? To perform the research, Zhang collaborated with Hongyan Qu, of China's Central University of Finance and Economics, using data from 3,320 CEO successions listed in China’s Shanghai and Shenzhen Stock Exchanges from 1997 to 2010. Like the U.S., China has a small but rising proportion of women CEOs. In both countries, hiring a female boss still breaks with tradition. By hiring from within and deploying women in top echelons, Zhang and Qu write, companies can hire new CEOs on the merits rather than fear of disruption.

Yan Anthea Zhang is the Fayez Sarofim Vanguard Professor of Management in Strategic Management at the Jones Graduate School of Business at Rice University. 

To learn more, please see: Zhang, Y. A., & Qu, H. (2015). 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. Academy of Management Journal, 59(5), 1845-1868.