Does pay-for-performance vary with gender-based leadership differences? If so, how, and when? Our study integrates person-environment fit theory with agency theory, we propose a set of competing predictions on the relationship between female CEO presence and pay-for-performance. Based on person-environment fit theory, female CEOs will be associated with low pay-for-performance. But agency theory predicts that female CEOs will result in high pay-for-performance to counterbalance female CEOs’ risk aversion tendencies. We further explore the joint effect of female CEO presence and pay-for-performance on a firm’s financial outcomes. Our findings indicate that firms will mirror female CEOs’ preferences with low pay-for-performance and, indeed, pay-for-performance may backfire if firms are led by female CEOs. Our empirical analyses provide substantive support for our predictions.
