Wives’ empowerment and corporate financial risk in Chinese family firms

•There is heterogeneity in female cofounders’ empowerment in Chinese family firms.•Founders’ wives have higher voting rights in regions with less gender inequality.•The wife's voting rights are associated with less debt and more cash of the firm.•The wife's management control is also associated with less debt and more cash.•The wife's empowerment in the firm is associated with lower earnings volatility. We investigate the economic empowerment of founders’ wives in public Chinese family firms. We show that female cofounders hold higher voting rights when their firms are headquartered in regions where gender stereotypes rooted in local social norms are less prevalent. We also find that firms whose female cofounders wield greater influence, through higher voting rights and more leadership roles, retain more cash, use lower financial leverage, and have lower earnings risk. Our findings have implications on the extension of wives’ marital power in the household to corporate decision-making, as well as on gender difference in the context of risk preference.