Stock prices of companies with more women executives outperformed peers for almost a decade, Credit Suisse says

Yujing Liu

Companies with more women executives tend to perform better in the stock market, according to a Credit Suisse study of more than 3,000 firms listed across the world.

Companies with women in at least 20 per cent of their executive management positions have outperformed those without by 3.6 per cent in the annual growth rate of share prices since 2010, according to “Gender 3000: The changing face of companies”, a report released by the Swiss investment bank recently.

Even though Credit Suisse refrained from establishing cause and effect, the study provided striking statistical evidence of the link between gender diversity in decision-making roles and companies’ share price performance.

“When we look at the nature of business models of companies, what we found is their returns on capital are more stable, with less volatility, among the more diverse companies. That rationalises what you are looking at,” said Richard Kersley, managing director and head of global thematic research at the bank.

“You still could come back to the idea of whether it is that good-quality companies tend to be diverse by definition, rather than diverse companies make them good quality. But the numbers are numbers,” he said.

Richard Kersley, managing director and head of global thematic research at Credit Suisse. Photo: Handout

Women currently account for 17 per cent of company management teams on average globally, up from 14 per cent in 2016, according to the study, which analysed data covering about 30,000 senior executives in 56 countries.

The study reiterated research carried out by universities and financial institutions around the world. For instance, this year, researchers at Stanford University found – through the analysis of about 60 diversity announcements by listed companies in the technology and finance sectors – investors pushed share prices higher when companies revealed more gender diversity.

Research conducted by graduate business school INSEAD, however, found one additional woman on a board of directors resulted in a 2.3 per cent decrease in a company’s market value on average. For the report released last month, the researchers analysed 14 years of data on listed companies in the United States.

The Credit Suisse study showed that companies with higher representation of women in their management teams tend to have healthier financial characteristics, including stronger cash-flow returns, higher margins and better credit ratings.

More than a third of women entrepreneurs have faced bias in raising capital

The same trend held true for family-owned businesses too, according to a separate Credit Suisse database study. Companies with at least 30 per cent women executives have generated excess returns on share prices of about 5.4 per cent since 2014.

In Hong Kong, representation of women in boardrooms lagged behind the global average and showed slow progress. Women accounted for 11.3 per cent of boardroom directors in 2019, up just 1.7 per cent from 2016 and below the global average of 21 per cent. In fact, women represented 16.3 per cent of senior managers, down from 18.2 per cent three years ago.

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