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The female manager effect: evidence on firm strategy and performance from a Matching Difference-in-Differences design
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DOI：10.1007/s11187-026-01261-0.png)
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Abstract
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This paper examines how female leadership is associated with firm strategy and performance in India. Using panel data from the World Bank Enterprise Surveys (2014–2022) and a Matching Difference-in-Differences (MDiD) design, we find that transitioning to a female top manager is associated with a strategic reorientation. Firms increase investment in employee training while reducing organizational process innovation. This strategic shift toward internal capabilities is accompanied by significant gains in labor productivity and sales, as well as an increase in the share of female employees. However, we find no statistically significant effects on profit margins or overall employment. These results are robust to falsification tests and sensitivity analyses. Crucially, we distinguish these effects from generic leadership turnover; unlike female successions, male-to-male transitions are associated with performance declines and no strategic renewal. Our findings indicate that female leaders create value through capability-focused strategies, contributing new evidence on the mechanisms linking gender to firm performance in a large emerging economy. Indian firms that appoint a woman as their top manager invest more in employee training and subsequently experience higher productivity and sales. Using data on Indian firms surveyed in 2014 and 2022, this study compares firms that changed from a male to a female top manager with otherwise similar firms that continued under male leadership. The results show that female-led firms placed greater emphasis on developing employees, reduced organizational process changes, and modestly increased the share of women in their workforce. These firms also achieved gains in labor productivity and sales, although their profit margins and total employment did not change significantly. The principal implication is that boards, investors, and policymakers should view female leadership not merely as a diversity objective, but as a potential source of capability development and firm growth and should work to reduce barriers preventing women from reaching senior management positions.
Keywords:
Gender
Firm performance
Innovation
Training
Management
India
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