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ANALYSIS

Firms with women at top 'perform better'

LONDON, September 25, 2014

Companies with higher female participation at board level or in top management exhibit higher returns, higher valuations and higher payout ratios, a report said.

While the representation of women in management positions and on the boards of companies is similar, it is qualitatively different in its makeup, added the CS Gender 3000: Women in Senior Management report released by Credit Suisse Research Institute, a unit of Credit Suisse AG, a leading financial services provider.

 “It’s been two years since we published the Gender Diversity and Corporate Performance report and there has been a lot of evidence to corroborate our original findings of the striking correlation between diversity at the board level and improved corporate financial performance,” said Stefano Natella, global head of Equity Research.

“We wanted to take this opportunity to revisit our arguments to see if they hold true in a post-crisis world and to consider what happens below the boardroom to assess whether diverse boards reflect diverse top management positions.”

The report evaluates the average financial metrics of companies, with the following key findings:

Higher return on equity (ROE): Since 2005, the average sector-adjusted ROE of companies with at least one female member since 2005 has been 14.1 per cent compared to 11.2 per cent for those with zero representation. When looking at top management and adjusting for any industry bias, companies with more than 15 per cent of women in top management have a 2013 ROE of 14.7 per cent compared to 9.7 per cent for those where women represent less than 10 per cent of the top management, a premium of 52 per cent.

Higher price/book value (P/BV) multiples: In line with higher average ROEs since 2005, the report finds an average P/BV of 2.3x for boards with female representation and 1.8x for those without. At senior management level, companies with more than 15 per cent women in management show a 2013 P/BV of 2.6x vs 2.0x where women represent less than 10 per cent, a 33 per cent higher valuation.

Higher payout ratio: Companies that have at least one woman on the Board of Directors have seen an average payout ratio of 38 per cent since 2005 vs 32 per cent at companies with no female directors. Similarly, at companies with more than 15 per cent of women in top management, the 2013 payout ratio was 43 per cent versus 36 per cent for companies with less than 10 per cent female management participation, a 22 per cent higher payout.

There is less convincing evidence than in our previous findings that women run more conservative business models: Companies with less than 10 per cent of women in top management showed at the end of 2013 a net debt to equity ratio of 35 per cent versus 57 per cent for companies with more than 15 per cent of women in top management. . There is no difference though when we look at board representation: average data since 2005 show that net debt/equity where there is female board representation has been 47.7 per cent compared to 47.5 per cent for male only boards.

The report further highlights that although the proportion of women in senior management is similar to that in the boardroom, their roles are arguably focused on areas of less influence, offering less opportunity to move into the most senior roles.

The analysis goes on to consider a number of obstacles that women face at mid-management levels and suggest various policy initiatives that could lead to further progress. – TradeArabia News Service




Tags: Credit Suisse | management | Women |

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