The impact of women in top management positions remains a topic of considerable debate, yet research on their influence on strategic decisions, particularly diversification, remains limited. This study examines how female CEOs shape diversification, a key strategic decision under CEO control. Drawing on social role theory, we argue that societal expectations and gender-stereotypical norms amplify agency-based concerns, leading female CEOs to pursue higher diversification levels than their male counterparts. We identify two key moderating factors. First, overconfidence, a prevalent psychological bias among CEOs, reduces the positive effect of female CEOs on diversification. Overconfident CEOs overestimate their abilities and underestimate risks, which alters the relationship between gender and strategic decisions. Second, the composition of the top management team (TMT) plays a crucial role. Greater female representation in the TMT, which has been shown to encourage cautious decision-making and strengthen monitoring, reduces the diversification levels associated with female CEOs. The final sample includes 1692 firms with 13,289 firm-year observations from 1993 to 2022, with 12,788 firm-years having male CEOs and 501 firm-years having female CEOs.
