Female Managers Can Raise Share Values

In pretty much all Western countries, men continue to dominate big business, and addressing this disparity is an ongoing controversy. No one can really justify the "class ceiling" and proposals for removing it range from voluntary or even legal quotas of women on the board, to strategies by which women can break through these traditional barriers through their own skills, personality and power. It does indeed seem that when the latter occurs, but not the former, a company stands to benefit considerably. This can be seen through some of the current female CEOs at large companies.

The Evidence
In this context, some research from Switzerland (Credit Suisse) and Italy (Mara Faccio et al.) provides a compelling economic case for having high-ranking women in companies. The very substantial Credit Suisse investigation reveals that even a modest degree of reduction in male dominance quite literally pays off. The difference in share prices can be substantial, as much as 26% for large firms. Credit Suisse points out that the results are not necessarily consistent over sectors, countries and time, but that "a bit more balance" can only help.

The consultancy company McKinsey also did some research on this issue and found that firms with more women in senior management did particularly well on various criteria, such as return on equity, operating profits and stock prices. The consultants even described the link between promoting women and doing well as "striking."

The Reasons
Why exactly this occurs is quite complex and there are various possible explanations. For one thing, male domination was also prominent among those causing the financial crisis from 2008 onwards. It is thus logical to look to women as a promising potential source of more prudent financial management. Indeed, it does seem that "less testosterone" reduces the tendency to take excessive risks. This notion has been confirmed by the Italian research mentioned above and from John Coates in Cambridge, England.

There are other factors as well. Some experts believe that the financial crisis has induced many firms to reconsider the way they run their businesses and diversity is one of the core issues that have emerged.

There is a huge body of research on the benefits of diversity and of a combination of leadership styles, indicating that a good gender mix helps raise efficiency, leading to more effective controls and monitoring. There is substantial evidence of productive managerial differences between the genders. Furthermore, women naturally understand other women better, or at least differently, than men, so they can cater more effectively to the "other half" of the population. More women at the top may therefore indicate that a company is doing well and has a sound, state of the art approach to management.

Yet another and quite different explanation (and a warning) is provided by Frank Dobbin and Jiwook Jung of the Harvard University Department of Sociology. They argue that "investor bias" may raise share prices where there are more female board members. They found that blockholding investors are careful not to look like they discriminate against firms with more female directors, even if they are skeptical of the real economic benefits. Furthermore, non-blockholders do not react negatively. Yet, Dobbin and Jung point out that, "the big picture seems to be that gender diversity does not help firms and may hurt them."

Whatever the Case, Let Gender Balance Occur Naturally
Kenneth Ahern and Amy Dittmar from the University of Michigan found that a legally-enforced quota is counterproductive. "Forced diversity" not only runs counter to fundamental market and efficiency-inducing forces, but obliges companies to appoint people for the wrong reasons. Radical changes are far less effective than allowing economic realities to prevail over time. Evidence from Norway in particular, with its 40% quota for female managers, indicates that such drastic measures can have disastrous consequences. In fact, the threat of a quota is arguably a better way to encourage progress, rather than actually proceeding with legislation.

It is also important to note that the male-female ratio differs naturally from sector to sector. For instance, there tend to be more women in consumer goods and the health sector, compared to automotive industries, or to use an even more extreme example, weapons manufacturing.

A Methodological Word of Warning from Harvard
Getting back to the Harvard sociologists, it is important to note that how exactly the research is done appears to impact quite substantially, and even fundamentally, on the results. Dobbin and Jung warn that "the effects of board diversity on corporate performance are not well understood." Specifically, they explain that studies comparing data at two points in time indicate that gender diversity in boards enhances stock values and profitability, but that panel data over several years yield either no or even negative effects. Clearly, more research is needed to resolve this ambivalence and uncertainty.

The Future Looks Reasonably Promising
Fortunately, research suggests that the gender imbalance is slowly but surely moving in the right direction. Egon Zehnder International has established that, in Europe, women's share of board seats has risen, albeit not terribly fast. But the trend is there all right, and there is no reason for it to slow down or go into reverse. There is still a long way to go, but the signs are there that we are heading firmly in the right direction.

The Bottom Line
Despite the debate on the merits or demerits of capitalism and of neoliberalism, and the massive shocks to the system in recent years, market forces and economic rationality remain vital. While the need for financial regulation seems clearer than ever, female managers are obviously, and without artificial support, proving their economic worth when given the chance. The glass gender ceiling is not productive, but on the other hand, one should not attempt to break it by force. Women are quite capable of proving their worth in raising corporate value through various financial, managerial and human capabilities that they can provide and men cannot.

More From Investopedia

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • US alarm as Turkey warns Syrian Kurd militia of more strikes
    US alarm as Turkey warns Syrian Kurd militia of more strikes AFP News - 39 minutes ago

    Turkey warned Monday it would carry out more strikes on a US-backed Kurdish militia in Syria if it fails to retreat, as Washington said President Barack Obama will meet his Turkish counterpart over the weekend. Turkish forces pressed on with a … More »

  • Mondelez abandons pursuit for U.S. chocolate maker Hershey
    Mondelez abandons pursuit for U.S. chocolate maker Hershey Reuters - 49 minutes ago

    The abandoned deal, which would have created the world's largest confectioner, underscores the grip that the charitable trust, set up by the company's founder Milton Hershey over a century ago to fund and run a school for underprivileged children, … More »

  • Shell restarts gasoline-producing unit at Puget Sound refinery Reuters - 52 minutes ago

    HOUSTON (Reuters) - Shell (RDSa.L) restarted a fluid catalytic cracking unit (FCCU) at its Puget Sound, Washington refinery on Aug. 23, according to a regulatory filing published on Monday. The unit was ... … More »

  • Most Asian Index Futures Pace U.S. Rebound; Oil Holds Above $47 Bloomberg - 57 minutes ago

    Contracts on equity gauges in Australia, South Korea and Hong Kong rose at least 0.3 percent in most recent trading, while futures on Japan’s Nikkei 225 Stock Average diverged after the yen failed to build on Friday’s selloff. U.S. crude was above … More »

  • Business Highlights Associated Press - 1 hour 26 minutes ago

    ___ Mylan launching cheaper, generic version of EpiPen The maker of EpiPens will start selling a cheaper, generic version of the emergency allergy shots as the furor over repeated U.S. price hikes continues ... … More »

  • Island Standoff Again Clouds China-Japan Ties in Run-Up to G-20 Bloomberg - 1 hour 34 minutes ago

    One of the reasons China may be escalating its activity in the East China Sea is to warn Japan against getting involved in the South China Sea spat. While not a claimant in those waters, Japan has drawn China’s ire for supporting Southeast Asian … More »

  • Tokyo, Wall St. shares boosted by Fed rate hike talk
    Tokyo, Wall St. shares boosted by Fed rate hike talk AFP News - 1 hour 35 minutes ago

    Japanese shares pushed sharply higher and Wall Street got a boost Monday by rising expectations of an interest rate increase this year by the US Federal Reserve. The rate hike talk, which came out of the Fed's central banking symposium at the end … More »

  • Yale grad students file petition seeking union certification Associated Press - 1 hour 49 minutes ago

    Yale University graduate students on Monday petitioned the National Labor Relations Board for union recognition, saying they have organized to address concerns surrounding pay and benefits and give themselves ... … More »

  • Dollar rises following uptick in US consumer spending AFP - 2 hours 7 minutes ago

    The dollar rose against the euro, the yen and the pound on Monday as US Commerce Department data showed consumer spending had risen in July. The rise in the dollar also followed a comparatively bullish ... … More »

  • Consumer Stocks That Fueled U.S. Bull Market Remain Mired in Rut Bloomberg - 2 hours 20 minutes ago

    Consumer-discretionary companies, the engine of the seven-year rally in U.S. equities with a gain of more than 400 percent, remain on course for the worst year since the financial crisis even as the American consumer continues to show signs of … More »

  • Rates on US Treasury bills rise at weekly auction Associated Press - 2 hours 27 minutes ago

    Interest rates on short-term Treasury bills rose in Monday's auction, with rates on six-month bills climbing to their highest level since March. The Treasury Department auctioned $40 billion in three-month ... … More »

  • Shell to sell certain Gulf of Mexico assets to EnVen Energy
    Shell to sell certain Gulf of Mexico assets to EnVen Energy Reuters - 2 hours 31 minutes ago

    Houston-based EnVen plans to buy the Brutus/Glider assets, which include a subsea production system, and the deal is expected to close in October. The Brutus/Glider assets have a combined current production estimate of about 25,000 barrels of oil … More »

  • U.S. Venture Firm Aims to Break Corporate Hold On Japan Startups Bloomberg - 2 hours 34 minutes ago

    “We realized we had to create excuses for founders to contact us,” Riney said in an interview at his office near Tokyo Station. Riney opened the Japan fund for 500 Startups, a fixture of Silicon Valley that made its name backing entrepreneurs just … More »

  • Phibro posts 4Q profit Associated Press - 2 hours 36 minutes ago

    On a per-share basis, the Teaneck, New Jersey-based company said it had profit of 38 cents. Earnings, adjusted for non-recurring costs, came to 40 cents per share. The maker of animal health products and ... … More »

  • Wall St. gains as data points to budding economy
    Wall St. gains as data points to budding economy Reuters - 2 hours 41 minutes ago

    Financial and commodity-sector stocks led the S&P 500 higher in a low-volume session on Monday after consumer spending rose for a fourth straight month, pointing to a pick-up in U.S. economic growth. After Fed Chair Janet Yellen said the case for a … More »

  • Oil down 1 percent, pressured by glut, dollar, Nigeria outlook
    Oil down 1 percent, pressured by glut, dollar, Nigeria outlook Reuters - 2 hours 48 minutes ago

    Oil prices settled down more than 1 percent on Monday, snapping two consecutive days of gains, on renewed concerns about an oil glut, a stronger dollar and expectations that Nigerian rebels will stop hampering that country's crude output. … More »

  • Catalent misses 4Q profit forecasts Associated Press - 2 hours 56 minutes ago

    The Somerset, New Jersey-based company said it had net income of 46 cents per share. Earnings, adjusted for one-time gains and costs, came to 52 cents per share. The results missed Wall Street expectations. ... … More »

  • IF Bancorp posts 4Q profit Associated Press - 2 hours 58 minutes ago

    The Watseka, Illinois-based bank said it had earnings of 29 cents per share. The savings and loan holding company posted revenue of $5.5 million in the period. For the year, the company reported profit ... … More »

  • How the Dow Jones industrial average fared on Monday Associated Press - 3 hours ago

    Banks, one of the weakest sectors in the market this year, led stocks higher on Wall Street Monday as traders anticipated that the Federal Reserve could raise interest rates at least once this year. That ... … More »

  • US consumer spending data boosts Wall St. shares AFP - 3 hours ago

    Wall Street registered solid gains Monday on signs of firm US consumer spending and rising expectations that the Federal Reserve will raise interest rates as soon as late September. The banking sector, ... … More »

  • U.S. shares gain, European shares dip on Fed rate hike bets
    U.S. shares gain, European shares dip on Fed rate hike bets Reuters - 3 hours ago

    By Sam Forgione NEW YORK (Reuters) - U.S. stock markets climbed on Monday while European share markets slipped in the wake of comments by top Federal Reserve officials that bolstered expectations for an ... … More »

  • U.S. Stocks Close Near Record High on Economic Data; Oil Slumps Bloomberg - 3 hours ago

    Brazil’s Ibovespa extended the world’s biggest gain this year on speculation President Dilma Rousseff will be permanently removed from office. The monthly jobs report due this Friday may provide more clues on whether policy makers will have room to … More »

  • EU to hand Apple Irish tax bill of $1.1 billion, source says
    EU to hand Apple Irish tax bill of $1.1 billion, source says Reuters - 3 hours ago

    The European Commission will rule against Ireland's tax dealings with Apple (AAPL.O) on Tuesday, two source familiar with the decision told Reuters, one of whom said Dublin would be told to recoup over 1 billion euros in back taxes. The Commission … More »

  • Markets Right Now: Banks lead US stocks higher on rate hopes Associated Press - 3 hours ago

    The latest on developments in global financial markets (all times local): 4:05 p.m. Stocks are closing up on Wall Street Monday, tacking higher after a three-day drop as the financial sector benefited ... … More »

  • Kentucky First Federal posts 4Q profit Associated Press - 3 hours ago

    On a per-share basis, the Frankfort, Kentucky-based company said it had profit of 5 cents. The bank holding company posted revenue of $2.6 million in the period. For the year, the company reported profit ... … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.124-0.005-3.88%
    N21.SI
    0.735-0.020-2.65%
    G13.SI
    0.128+0.014+12.28%
    RE4.SI
    0.3550.0000.00%
    E5H.SI
    4.12-0.10-2.37%
    Z74.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.355+0.115+47.92%
    BAZ.SI
    0.151+0.024+18.90%
    D79.SI
    0.23+0.03+15.00%
    AWI.SI
    0.475+0.060+14.46%
    588.SI
    0.128+0.014+12.28%
    RE4.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.205-0.105-33.87%
    BCZ.SI
    0.25-0.10-28.57%
    BKX.SI
    0.13-0.05-27.78%
    AYL.SI
    0.165-0.055-25.00%
    BKZ.SI
    0.745-0.130-14.86%
    564.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3591-0.0002-0.01%
    USDSGD=X
    1.5208+0.0002+0.01%
    EURSGD=X
    1.7818+0.0003+0.02%
    GBPSGD=X
    74.9690+0.052+0.07%
    SGDJPY=X
    5.7033+0.0009+0.02%
    SGDHKD=X
    2.97530.000.00%
    SGDMYR=X
    9,752.50390.000.00%
    SGDIDR=X
    4.91430.000.00%
    SGDCNY=X
    1.0295-0.0004-0.04%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,326.10-1.00-0.08%
    GCZ16.CMX
    18.84+0.08+0.41%
    SIU16.CMX
    96.93+1.14+1.19%
    ^XAU
    2.08+0.01+0.34%
    HGU16.CMX
    47.00+0.02+0.04%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.18-0.06
    ^FVX
    1.57-0.07
    ^TNX
    2.22-0.08
    ^TYX