The Financial Impact of Female Leadership

December 1, 2023

Chandra Srivastava, PhD, Saim Kashmiri, PhD, and Vijay Mahajan, PhD

Stock Image of Two Women in An Office

In recent years, the percentage of women in top management teams (TMTs) at large firms has increased from almost 0% to nearly 25%. This upswing in female leadership raises the question of how having female influence in top management teams (FITMT) can shape a company's approach to customers and, consequently, influence the firm’s financial performance.

In this study, we demonstrate that female leaders are more inclined to prioritize strong customer relationships compared to their male counterparts in similar roles. We believe this customer-centric approach can enhance a company's ability to satisfy customers, ultimately leading to improved financial outcomes. Our study sheds light on how the presence of women in top leadership roles can impact a company's customer-oriented strategies and, consequently, its long-term financial success.

The Significance of Self-Construal and Customer Orientation

Self-construal refers to how individuals define themselves as independent from or interdependent with others. Self-construal affects how individuals respond to stimuli, interpret situations, and make decisions. As the descriptions imply, those with an independent self-construal are driven by individual goals and consider themselves as a separate from others. Those with an interdependent self-construal are driven by developing relationships and consider themselves members of a bigger picture.

We hypothesized that executive self-construal affects the firm’s focus on customers; specifically, that executives with an interdependent self-construal focus more on important stakeholder relationships and thus adopt a more customer-centric approach to business (or customer orientation), which in turn leads them to identify and prioritize customer-centric strategies. Building a positive customer orientation within a firm requires top-down directive, as leadership is typically responsible for strategy and resource allocation, which then permeates the rest of the organization. Creating and sustaining a strong customer orientation within a firm requires that executives in TMTs naturally value customers and consider customers when making strategic decisions for the firm. Prior research has found that, in the general population, females typically tend to exhibit interdependent self-construal, while male counterparts tend to exhibit independent self-construal. Thus, we further hypothesized that including female executives in top management teams has a positive impact on the firm’s customer orientation, leading to positive long-term financial performance for the firm.

The Female Factor: Female Influence in Top Management Teams

To confirm our initial hypothesis that female executives lead with an interdependent self-construal, we performed content analysis of word usage within CEO shareholder letters. We examined 20 sample firms with female CEOs and 20 sample firms with male CEOs. We selected three random letters to shareholders from each executive and measured the number of first-person plural pronouns (we, our, etc.)—indicating interdependent self-construal—versus number of first-person singular pronouns (I, my, etc.)—indicating independent self-construal. We found that the female CEOs had a significantly higher average degree of interdependent self-construal and marginally lower average degree of independent self-construal than the male CEOs in our subsample, thus indicating support for the proposed relationship between self-construal and executive gender.  

We further examined leadership, reporting, and financial data for 389 publicly-traded Fortune 500 firms from 2008-2015. First, we reviewed the ratio of females in executive positions, the hierarchical rank of female executives, and the number of responsibilities with which female executives were tasked (as noted in job titles in firms’ proxy statements and 10-K reports). This data was combined into one measure within our study. In order to test firm customer orientation, we utilized a text-analysis software to measure the frequency of customer-oriented words within each firm’s annual report for each of the eight years. With this data, we developed a numerical measure of customer orientation for each firm for each year. Finally, we accessed financial performance data from Compustat and used Tobin’s Q (a financial indicator measuring a relationship between market valuation and replacement cost of a company) as a measure of firm long-term financial performance. In analyzing these factors, we found a positive relationship between FITMT and long-term firm financial performance, which may be partially mediated by customer orientation, thus confirming our hypothesis that including females in TMTs is associated with positive long-term financial performance for a firm.

Real Estate Implications

In general, we suggest that many firms can benefit from including female executives in the TMT. For firms that are unable to add executives to their current team at this point in time, just knowing that an all-male TMT is likely to undervalue customer orientation allows them to plan for other ways to correct the imbalance. However, it is also important to caution against an all-female leadership team, as this imbalance may place too much of a focus on customers, potentially preventing the firm from pursuing other important strategies and leaving it vulnerable to competitors’ strategies and other external factors.

Our findings hold significant potential in real estate. We find that females in leadership are likely to cultivate a culture that values diverse perspectives and promotes strategies that better serve the needs of clients. Prioritizing customer orientation can ultimately lead to increased client satisfaction, repeat business, and referrals. These outcomes are always important for any real estate professional, but especially right now in a tight-inventory, high interest rate, low volume market. Keeping and nurturing customers is key to success in competitive markets. Furthermore, female influence may drive customer-centric innovation in real estate strategies and marketing, giving firms a competitive edge.

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Recommended Reading

Srivastava, Chandra, Siam Kashmiri, and Vijay Mahjan (2023), “Customer Orientation and Financial Performance: Women in Top Management Teams Matter!” Journal of Marketing, 87(2), 190-209.

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About the Authors

Chandra Srivastava, PhD
Assistant Professor of Marketing, St. Edward’s University and Chief Marketing Officer, Calque, Inc.
Dr. Srivastava Chandra (PhD – University of Texas at Austin) spans the academic and practitioner worlds to conduct research on managerially relevant questions surfaced through consulting. She specializes in marketing strategy, digital marketing, corporate reputation, and stakeholder relations, and her academic research focuses on the dynamics between leadership teams, customer orientation, and social media crisis management. In her recent industry work, she is the Chief Marketing Officer at Calque, a fintech company that helps lenders and agents offer ‘buy before you sell’ solutions. She combines marketing agency experience for Fortune 50 firms with start-up ‘get it done’ mindset to deliver high-quality marketing campaigns optimized by analytics.

Siam Kashmiri, PhD
Mr. and Mrs. James E. King Professor and Associate Professor of Marketing, University of Mississippi
Dr. Saim Kashmiri’s (PhD – University of Texas at Austin) research interests are in marketing strategy, brand management, innovation, and marketing-finance interface. His research has been published in the Journal of Marketing Research, Journal of the Academy of Marketing Science, International Journal of Research in Marketing, Journal of Business Research, Journal of Business Ethics, Marketing Letters, and the Marketing Science Institute Working paper series. Dr. Kashmiri has also been awarded the Fred Moore Assistant Instructor Award (the highest teaching award for Assistant Instructors) at the University of Texas at Austin and the MBA (Campus) Professor the year 2020.  Dr. Kashmiri was named University of Mississippi’s School of Business Administration’s Outstanding Junior Researcher for the year 2017. He also won University of Mississippi’s School of Business Administration’s Best Publication award of 2018. He currently serves on the editorial boards of Journal of Business Research and Marketing Education Review and also as a reviewer for a number of top-tier marketing journals.

Vijay Mahajan, PhD
John P. Harbin Centennial Chair in Business, University of Texas at Austin
Dr. Vijay Mahajan’s (PhD – University of Texas at Austin) research interest include marketing strategy, product diffusion, and research methodology. He has received numerous lifetime achievement awards, including the American Marketing Association (AMA) Charles Coolidge Parlin Award for visionary leadership in scientific marketing. The AMA also instituted the Vijay Mahajan Award in 2000 for career contributions to marketing strategy. In 2006, he received the Distinguished Alumnus Award from the Indian Institute of Technology (Kanpur) for his contributions to management research. Dr. Mahajan is author or editor of 14 books, which have been translated into 12 language and won numerous awards. He has published in numerous top academic journals and has been recognized with several best paper awards. He has also served on the editorial review boards of Journal of Marketing, Journal of Marketing Research, Marketing Science, and Journal of Consumer Research. Professor Mahajan has consulted with various Fortune 500 companies and has delivered executive development programs worldwide. His research has been reported and reviewed in dozens of media outlets in many countries including CBS, BBC, NPR, Wall Street Journal, NY Times, Washington Post, LA Times, Financial Times UK, Economist, and Harvard Business Review, among numerous others.