Taking a Broader View: Female Directors, CEO Strategic Attention Breadth, and Firm Performance

Abstract

Existing research has shown that greater female membership on the board of directors has the potential to positively impact firm financial performance. However, the specific cognitive means through which these gender effects manifest remains unexplained. Our study sheds light on these cognitive means by examining how female board membership can influence chief executive officers (CEOs)’ attention allocation. We integrate the literatures on upper echelons, strategic attention, and gender-based information processing research and argue that because women tend to exhibit broader and more comprehensive information search and processing than men, female directors, through their interactions with CEOs and service on boards, will bring broader insights and perspectives to the boards than male directors. Further, we propose the relationship between the number of female directors and CEO strategic attention breadth is conditioned by three CEO characteristics that can exert influence on CEO-board information exchange: CEO gender, tenure, and overpayment. Specifically, we propose that boards comprised of more women will exert a greater effect on the strategic attention breadth of male CEOs and CEOs with longer tenure but will have a smaller effect on the strategic attention breadth of CEOs who are overpaid. Finally, we propose that CEO attention breadth mediates the relationship between the number of female directors and firm performance. We test our arguments using a sample of S&P 1500 firms and find broad support for our theorizing. Our study makes several key contributions to upper echelons and corporate governance, gender-based information processing, and executive attention research. Funding: Part of the data collection is funded by Dean’s Summer Small Research Grant at Katz Graduate School of Business, University of Pittsburgh.