What's in a face? CEO masculinity and cost behavior

Abstract

We examine the association between an “off-the-job” CEO characteristic—masculinity—and firm cost behavior. First, we analyze cost elasticity, defined as the responsiveness of costs to changes in sales volume, and find that masculine CEOs tend to be associated with firms with more elastic cost structures, characterized by a lower proportion of fixed costs. Second, we investigate cost stickiness, a phenomenon in which expenses decline less during sales downturns than they rise during periods of sales growth. Our evidence suggests that masculine CEOs are associated with lower cost stickiness, potentially leading to underinvestment due to aggressive cost-cutting in response to declining sales. These cuts often concentrate on non-value-enhancing expense categories. Finally, we find that masculine CEOs engage more in real earnings management through their influence on costs, reflecting an “achievement drive” incentive. This study adds to the broader understanding of how CEO personal characteristics shape firm-level operational decisions and financial outcomes.