Companies with women on the board outperform peer group
by Gill Montia
A new report from Credit Suisse Research Institute claims that companies with at least one woman on the board have outperformed (in terms of share price) those with no women on the board, over the course of the past six years.
They also exhibit higher return on equity, lower leverage and higher valuations.
According to the study, when economic growth was relatively robust, there was little difference in share price performance between companies with and companies without women on the board.
However, post the 2008 financial crisis stocks with women on the board have strongly outperformed those without any woman on the board.
Giles Keating, Credit Suisse’s head of research for private banking, comments: “Unique in its scale and global reach this study contributes to the robust debate surrounding the importance of gender diversity and boards.”
The research involved analysing the performance of close to 2,400 companies and the four key findings are as follows:
1. Higher return on equity (ROE): The average ROE of companies with at least one woman on the board over the past six years is 16%; four percentage points higher than the average ROE of companies with no female board representation (12%).
2. Lower gearing: Net debt to equity of companies with no women on the board averaged 50% over the past six years; those with one or more have a marginally lower average, at 48%. However, the study notes the much faster reduction in gearing that took place at companies with women on the board as the financial crisis and global slowdown unfolded.
3. Higher price/book value (P/BV) multiples: In line with higher average ROEs, aggregate P/BV for companies with women on the board (2.4x) is on average a third higher than the ratio for those with no women on the board (1.8x).
4. Better average growth: Net income growth for companies with women on the board has averaged 14% over the past six years compared to 10% for those with no female board representation.