Do Venture Capitalists Replace Women with Men to Lead Portfolio Companies?

Abstract We propose a novel approach to investigate gender discrimination in venture capital (VC) firms by examining the gender gap in the leadership replacement of portfolio companies. Our approach addresses the selection bias stemming from fewer female entrepreneurs seeking VC funding; it does not rely on experimental designs and offers direct evidence of whether venture capitalists replace female entrepreneurs with male ones. We specifically examine portfolio companies in China that obtained funding between 1984 and 2018 and find that female leaders in portfolio companies are 3.1% more likely to be replaced after securing capital than their male counterparts, women are 7.8% less likely to lead a portfolio company after its leadership replacement than before it, and replacing a female leader with a male leader does not improve the probability of a successful VC exit. These results confirm gender discrimination in venture capitalist practices in China. Further tests reveal the role of Confucian culture in this gender bias.