Women leaders and firm performance in family businesses: An examination of financial and nonfinancial outcomes

This study examines how the inclusion of women leaders in upper levels of management is associated with organizational performance in family-controlled businesses. Although the idea that gender diversity is beneficial for business has gained popularity, the business case remains equivocal and scholars are being urged to offer renewed and more nuanced support for when and how women in senior leadership roles may affect organizational outcomes. In response to these calls, we distinguish between financial and nonfinancial performance outcomes, comparing family and nonfamily businesses. Based on a framework that combines the upper echelon and double standards of competence theories, we examine the relationship between female leadership and firm performance, using panel data of large public firms from the S&P 500 over a five-year period. Our findings indicate that female-led organizations (i.e., those with a female CEO and/or CFO) outperform male-led organizations in terms of nonfinancial performance across family and nonfamily businesses. However, in financial terms, we find a statistically significant and positive relationship between female leaders and firm performance only in nonfamily businesses. Our main theoretical contribution is to suggest that the upper echelon and double standards of competence theories may not apply in family businesses in the same way as they do in nonfamily businesses, due to limitations to managerial discretion in the former. Our study has implications for practitioners, especially for owners of and advisors to family businesses.