Breaking the mold: An examination of board discretion in female CEO appointments

We propose and test a theory of board discretion in the context of the board's selection of a female CEO. We propose that boards also have discretion, an area that has typically focused exclusively on managers, and examine the conditions under which boards, facing high levels of uncertainty, have the latitude to make nontraditional choices, particularly when a negative equity market reaction to such a selection is likely. In the context of the nontraditional choice of a female CEO successor, we observe that the strong financial health of the firm and boardroom and situation-specific experience grant the board the discretion to select a female CEO. We test our model using all Standard & Poors (S&P) 1500 firms that experienced a CEO succession between 2000 and 2013. Implications for practice and research are discussed.