Role and Consequences of CEO Gender Bias in Business Networks

• In Event: Gender in Labor Market, Business Network, Managerial Aspiration, and Financial Literacy

Abstract

This study investigates how gender bias among CEOs shapes corporate business networks. Using comprehensive administrative records covering the universe of corporate connections and their balance sheets in Costa Rica over a 12-year period, I find strong evidence that firms are more likely to trade with businesses led by CEOs of the same gender. Three different analytical approaches substantiate this pattern. First, at the aggregate level, female-led firms engage in purchasing relationships with other female-led firms at significantly higher rates than what would be expected under random matching: 12.4% higher inthe extensive margin and 17.7% higher in the intensive margin. Second, transaction-level buyer-seller pair analysis confirms that firms of the same gender are around 4% more likely to trade. Third, an event study reveals that firms switching from a female to a male CEO reduce their purchases from female-led firms, while firms switching from a male to a female CEO increase them. Since incoming CEOs retain more than half of their firm’s existing network, these results provide a clearer identification of gender homophily by isolating the current CEO’s influence on upstream networks. To assess the impact of gender bias on firmperformance, I track trajectories in the first three years of operations of firms in environments with high and low levels of bias. Firms in the bottom quartile of gender bias achieve 13.8% to 18.5% higher profits and are 6% more likely to survive their first three years compared to those in the top quartile. Additionally, greater gender bias is associated with lower revenue per worker, consistent with a model of production featuring discrimination in supplier selection. These findings suggest that policies promoting gender-diverse leadership and supplier diversity, such as inclusive procurement programs or incentives for firms to engage with women-led businesses, could help reduce bias in corporate networks and enhance overall firm performance and survival.

Author

• Santiago Campos-Rodriguez, University of California, Irvine
  Presenting Author