42 / Rotman Management Spring 20 19
managers to capital-rich divisions; and extra capital allocations
after the appointment is made. In our analysis of the first item,
we found that male managers are assigned to divisions that his-
torically receive more capital and some evidence that male man-
agers are assigned to larger divisions.
Our results are consistent with survey evidence that CEOs’
personal attitudes towards division managers have profound ef-
fects. For example, in a study of financial decision-making at S&P
500 firms, researchers found that the CEO’s opinion of a division
manager is the second most important factor in capital budget-
ing, after the NPV (net present value) rule. Our evidence suggests
that the gender gap in resource allocation is indeed related to the
decision maker’s gender attitudes, whether conscious or subcon-
scious, and that the origins of such attitudes can be traced to the
CEO’s formative years.
Following is a summary of our key findings regarding capital
allocation when combined with family characteristics, education
and community.
FAMILY CHARACTERISTICS. We defined the variable ‘working moth-
er’ as an indicator that equals ‘1’ if the CEO had a working moth-
er and ‘0’ if she was a housewife, and compared the allocation of
capital to male and female division managers across firms run
by these two types of CEOs. The result: Female division man-
agers obtain about 150 basis points less in annual capital in firms
run by CEOs whose mother did not work. Conversely, there is
not a statistically significant difference between the allocation
to male and female managers in firms run by CEOs with a work-
ing mother.
We also investigated whether parenting daughters affects
CEOs’ allocation of capital between female and male division
managers. We defined ‘children’s gender imbalance’ as the dif-
ference between CEOs’ number of sons and daughters, nor-
malized by their total number of children. The result: Female
division managers obtain less capital in firms run by CEOs
with a high children’s gender imbalance. However, the differ-
ence in capital allocation between male and female managers
disappears in firms run by CEOs with a balanced number of sons
and daughters.
To capture the overall effect of CEOs’ family backgrounds,
we calculated a comprehensive family index as the average be-
tween the percentile rankings of each CEO’s working mother,
parents’ education imbalance, and children’s gender imbalance
values. The result: Female managers obtain 170 basis points in
capital expenditure in firms run by CEOs with higher family-re-
lated gender imbalance. In contrast, there is no difference in allo-
cation between male and female managers in firms run by CEOs
with low values on the family index.EDUCATION. Next, we considered the education of CEOs’ parents
with respect to capital allocation. The variable ‘parents’ educa-
tion imbalance’ equalled the difference between the number
of education years for the CEO’s father and the CEO’s mother.
Higher values imply that the CEO’s father had a higher educa-
tional attainment than his mother. The result: Female division
managers obtained less capital only in firms run by CEOs with
a high ‘parents’ education imbalance’. In particular, female divi-
sion managers in such firms obtained about 120 basis points less
in annual capital than male managers.
We defined ‘high school gender imbalance’ as an indica-
tor variable that equals ‘1’ if the CEO attended a single-sex high
school and zero otherwise. University gender imbalance was
defined as the fraction of female students in the university that
the CEO attended as an undergraduate student (as of the dates
of attendance). The result: Female division managers obtained
significantly less capital only in firms run by CEOs that attended
gender-imbalanced educational institutions. A high gender im-
balance in CEOs’ high schools corresponded to about 160 basis
points less capital allocated to female managers, whereas a high
imbalance in CEOs’ universities corresponds to about 120 basis
points less capital.
We also calculated a comprehensive index of education gen-
der imbalance as the average percentile ranking of High School
Gender Imbalance and University Gender Imbalance, findingFemale division managers obtained 15 0 basis points less in annual
capital in firms run by CEOs whose mothers did not work.