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Women CEOs hit ‘green ceiling’ when attracting investors, study says

Wednesday, May 9, 2012  
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When it comes to a company’s critical stock market debut, investors are less likely to trust their money to an enterprise led by a female CEO, a University of Utah researcher reports.

"Bias against top-level female executives seems entrenched despite strides women generally have made in filling management positions within firms making their initial public offerings,” according Lyda Bigelow, an assistant professor at the university’s David Eccles School of Business, co-author of "Skirting the Issues: Evidence of Gender Bias in IPO Prospectus Evaluations.”

The study enlisted 222 second-year MBA candidates -- 45 of them females -- to assess real IPOs forinvestors. The students also considered an IPO by a fictitious cosmetic surgery firm modeled using financial data from a real company’s successful entry into the stock market. Keeping the IPO financial and industry information identical, the researchers varied the gender distribution of the bogus company’s top management team: first names were changed, from Matthew to Martha, for example, as were executive photos in IPO pitch materials the students reviewed.

"Despite identical personal qualifications and firm financials, female founders and CEOs were perceived as less capable than their male counterparts, and IPOs led by female founders and CEOs were considered less attractive investments,” Bigelow said.

The apparent reluctance to invest in IPOs spearheaded by women exists even though nearly half of all privately held U.S. businesses are owned or led by women. Statistics also indicate that between 1997 and 2007, women holding corporate officer positions grew from 10 percent to 55 percent. In 2009, however, not one of 19 high-tech IPOs Bigelow and her co-researchers studied was led by a female CEO, though all but two of those firms had one or more lower-ranking female executives.

The lack of female-led initial public offerings suggests a potentially larger problem – a gender-based capital gap for new ventures, Bigelow said. "Like the glass ceiling of corporate America that has limited the advancement of female managers, female entrepreneurs face a ‘green ceiling’ when it comes to financing. Taken as a whole, our results suggest that gender stereotypes are alive and well and, moreover, that such stereotypes impact investment decisions.”

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