Female leadership and firm performance: Evidence from China

Based on the notion that women cooperate more with women than with men, we investigate whether the cooperation between women at the top of corporate hierarchy affects firm performance. Using a large sample of public firms in China, we show that the cooperation between female leaders and female directors leads to higher ROA but lower Tobin’s q. The opposite results are caused by the intensified earnings management due to female cooperation. Specifically, female leaders with cooperation of female directors tend to engage in earnings management, which results in overstated accounting profits as well as unfavorable stock market performance. In addition, we find that the female cooperation effect arises from the managerial support provided by female executive directors. The cooperation effect is stronger in provinces with lower market development, suggesting that the strengthened power of women is of more importance in decision making in less developed markets. Collectively, we demonstrate that “women helping women” could be detrimental to shareholder value.