Gender Difference in CEO Optimism and Firm Outcomes

I study gender differences in CEO optimism and how they relate to firm outcomes. I use quarterly earnings call transcripts of public firms between the years 2016 and 2023 for this analysis. To measure CEO optimism, I apply textual analysis to CEOs’ answers during Q&A sessions. I find that female CEOs are more optimistic than male CEOs, and optimism weakly correlate with firm performance, and significantly correlated with stock market reactions. Finally, I propose the role congruity theory to explain the reversed gender difference in CEO optimism. Female CEOs may appear overly optimistic in order to overcome the incongruity between the stereotypical masculine leader role and the female gender role. To test the role congruity theory and address concerns of reverse causality and exogeneity, I propose the #Metoo Movement as a potential exogenous shock to female CEO optimism. However, no significant change is observed, potentially due to power issues. Overall, my results suggest that female CEOs are more optimistic than male CEOs. Additionally, there is a positive relationship between CEO optimism and firm outcomes. Taken together, my results indicate that firms led by female CEOs tend to experience better firm performances and stock market reactions.