The glass cliff: are women disproportionately appointed to run troubled firms?

The “glass cliff” hypothesis states that, although women today sometimes obtain powerful positions, those positions are disproportionally risky or precarious, causing women to underperform in their new jobs. In the corporate context, the “glass cliff” hypothesis predicts that women are more likely to be appointed CEOs when a company is performing poorly, is in the middle of a crisis or is otherwise unlikely to succeed. The author tests this hypothesis on a large sample of all US public companies between 1992 and 2019. Using multiple measures of company performance, different ways to quantify changes over time and different research designs, the author finds no meaningful support for the “glass cliff” hypothesis. Most pre-appointment measures of firm performance or firm policies – changes in firm stock prices, firm market value, earnings before interest, taxes, depreciation and amortization, percentage sales growth between year −2 and year −1 (sales growth), market-to-book ratio, earnings per share, R&D expenditures, long-term debt or dividend payments (dividends per share) – predict the appointment of women CEOs. Furthermore, the worst performers – companies in the bottom 10% of performance measures – are not more likely to appoint women CEOs. The sole exception is changes in firm employees: firms are more likely to hire women CEOs after experiencing declining employment, relative to firms that hire men CEOs.