Table 3 reports the findings of the regressions for the sample of
female executives and the randomly selected sample of male executives.
The results for these smaller sub-samples are similar to those reported
in Table 2 although the intensity of stock sales appears to be higher.
In Panel A, the [[beta].sub.1] value of -0.779 indicates that the
executives sell 779 shares in response to 1,000 new stock options. In
Panel B, the [[beta].sub.1] value is -1.072 indicating that the
high-ownership executives sell 1,072 shares for every 1,000 stock
options they receive. The findings on gender in Panel C show that the
male executives sell shares more than the female executives--they sell
867 shares ([[beta].sub.1] = -0.867) for every 1,000 new stock options
while the female executives sell 220 shares ([[beta].sub.2] = -0.220)
for every 1,000 new stock options. The findings in Panel D show that the
high-ownership male executives sell 1,238 shares ([[beta].sub.1] =
-1.238) per 1,000 new stock options and the high-ownership female
executives sell 247 shares ([[beta].sub.3] = -0.247) per 1,000 new stock
options.
Conclusions
Are female executives more risk averse than male executives? In
this paper, the authors consider this issue by examining the portfolio
adjustment behavior of male and female executives in response to new
stock option awards. Selling stocks to reduce the risk of the personal
portfolio indicates that the executive is risk averse. The hypothesis is
drawn from prior empirical evidence that females take less risk than
males in their financial decisions. It is predicted that the risk-averse
female executives would sell more shares than their male counterparts.
The findings are contrary to this prediction, however. The study finds
that the female executives sell fewer shares than the male executives
once new stock options are granted. This is true even after controlling
for the ownership levels. Hence, female executives do not exhibit higher
risk aversion than male executives.
There can be several explanations for the inconsistent findings.
Male executives may sell more shares because they trade more often than
women. (2) Also, an individual's risk-taking propensity may depend
on other attributes such as marital status [Sunden and Surette, 1998;
Bernasek and Shwiff, 2001] and age [Lewellen et al., 1977]. For example,
a female executive's decision to hold risky portfolio may not only
depend on her attitude towards risk but her partner's attitude
towards risk or some combination. (3)
One important implication of the findings of this study is that the
board of directors may consider awarding incentive-based compensation
such as stock options based on gender. Since the female executives are
likely to sell fewer shares in response to new options, they should be
given more stock options than the male executives. For the male
executives, stock option award appears to be an ineffective mechanism to
increase stock ownership and reduce agency conflict between the managers
and the shareholders. Other types of corporate governance mechanisms
(e.g., board composition) may be more appropriate for the male
executives.
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ZAHID IQBAL *, SEWON O *, AND H. YOUNG BAEK **
* Texas Southern University and ** Nova Southeastern
University--U.S.A.
Footnotes
(1) Contrary to the findings reported in these studies, a few other
studies observe that females seek same or higher risk than men in their
financial decisions. Schubert et al. [1999] find no gender differences
in risk attitudes when identical investment and insurance decisions are
presented to the respondents. Bliss and Potter [2002] find evidence that
women fund managers hold portfolios with marginally more risk than men.
Atkinson et al. [2003] observe that male- and female-managed funds do
not differ significantly in taking risk. In Masters and Meir's
[1988] study, no differences were found in the risk-taking propensity of
male versus female entrepreneurs.
(2) See Lewellen et al. [1977] for evidence that males trade more
frequently than females.
(3) Although the authors are aware that marital status should be a
control variable, they are unable to include it in the regression model
because Standard and Poors ExecuComp database does not report this data.
Alternatively, hand-collecting marital status data from a different
source will be extremely tedious for the samples that involve thousands
of cases.
TABLE 1
Descriptive Statistics for the Full Sample and Randomly
Selected Smaller Sample of Male Executives
Male Executives
Variables N Mean Median SD
Panel A: Full Sample
Changes in shares 35,428 -7.19 1.18
Executive ownership (%) 36,592 0.805 (a) 0.066 (g)
New stock options 59,489 136.15 (b) 40.50 (g)
Option exercise 22,826 126,903 29.63 (g)
New Restricted shares 14,596 37.13 7.40 (g)
Salary and bonus 67,004 596.91 (c) 395.10 (g)
Panel B: Randomly Selected Smaller Sample of Male Executives
Changes in shares 1,483 -38.19 1.14
Executive ownership (%) 1,528 0.647 (c) 0.062 (g)
New stock options 2,462 139.56 40.21 (g)
Option exercise 965 148.68 29.00 (g)
New Restricted shares 573 43.11 6.94 (f)
Salary and bonus 2,763 599.83 (c) 402.22 (g)
Female Executives
Variables N Mean Median SD
Panel A: Full Sample
Changes in shares 1,018 -7.13 0.79
Executive ownership (%) 1,061 0.376 0.028
New stock options 2,503 111.52 35.00
Option exercise 760 117.48 20.38
New Restricted shares 640 38.14 5.76
Salary and bonus 2,763 407.56 295.00
Panel B: Randomly Selected Smaller Sample of Male Executives
Changes in shares
Executive ownership (%)
New stock options
Option exercise
New Restricted shares
Salary and bonus
Variables are in thousand except Executive ownership (%).
(a)(b), and (c) denote significant difference in mean
values between male and female executives at the 10%,
5%, and 1% levels, respectively. (f), and (g) denote
significant difference in median values between male
and female executives at the 5%, and 1% levels,
respectively.
TABLE 2
Executive Gender, Share Ownership, and Change in Shares
Owned in Response to Stock Option Awards for the Full
Sample of Firms
[H.sub.0]:
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