Female Skin in the Game: Bridging the Gender Financing Gap

I examine the role of skin in the game, such as paid-up equity or collateral, in narrowing the gender financing gap in entrepreneurship. I find, first, that skin in the game reduces this gap: a 10 percent increase in collateral value raises bank debt by around 4 percent for women—twice as much as for men. Similarly, one standard deviation increase in paid-up equity ratio (46 percentage points) boosts bank debt by 6.22 percent more for female-owned firms, or at least 1.7 times more than for men. This aligns with cross-country evidence that more equal property rights are linked to better access to credit for women and improved conditions for female entrepreneurship. Second, I find the return on investment from an additional dollar of debt is higher for women, implying that women face more significant financial constraints and forgo higher NPV projects. The economic magnitude is large: for a female-owned business with one standard deviation larger leverage, the performance gap (2 percentage points lower ROA for females) shrinks by at least 60 percent. My findings imply that policies like subsidizing unsecured credit or increasing collateral availability for women (e.g., through property rights) could help reduce the gender financing gap.

Board Diversity and Sectoral Gender Disparities

I study the impact of board gender quotas focusing on the importance of gender diversity in traditionally male-dominated sectors, such as Science, Technology, Engineering, Mathematics and Finance (STEM&F). I find that, first, the market reaction to California’s 2018 board gender diversity law was relatively positive for firms in STEM&F sectors (-1.1 percent) compared to other sectors (-3.8 percent). This cannot be attributed to hiring more qualified female directors; in fact, the increased demand for women on boards was accompanied by a decrease in qualifications for female directors in all sectors. Instead, it is consistent with research showing diverse boards enhance innovation. Second, the sectoral gender gap—20 percent lower board diversity in STEM&F compared to other sectors—disappeared after the law, but it widened in other states potentially due to director relocations across states. These findings highlight the importance of incorporating sector-specific implications of gender quotas, especially the ones targeting the higher tiers of employment, where the pool of qualified candidates is limited. 

The Power of Words (with Urszula Ayache, Univeristy of Oslo)

Prior research supports the Upper Echelon theory, which posits that values, experiences, and personalities of top managers influence their organization’s strategic decisions and effectiveness. Furthermore, social and psychological theories suggest that language and communication style can reveal unobservable personality traits and values. In this study, we use machine learning techniques to extract textual information from quarterly earnings calls between company executives, analysts, and investors. Through the adoption of a cognitive-linguistic perspective and the application of the Linguistic Inquiry and Word Count tool, we discern the underlying personality traits of top executives, encompassing dimensions such as Analytical thinking, Clout, Authenticity, and Tone, inferred from their communication style during the question-and-answer sessions. We then examine the impact of these traits as well as interaction of traits and gender on financial characteristics of companies, including but not limited to performance, risk management, long-term financial sustainability, and stakeholder value creation. Additionally, the communication style of executives can act as a signal that influences the expectations of analysts and investors. We employ event study methodology and investigate the influence of language used during these calls on subsequent market reactions, including abnormal returns and trading volume.

Financial Innovation and Female Access to Finance

Gender Diversity and Green Innovation (with Filiz Unsal, OECD)