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Investors rate women board members higher than men

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Berlin: Companies with women on their executive and supervisory boards are valued more highly by the stock markets, especially if they made it to the top without a gender quota, a new study has found.

Investors rate the performance of the few women who climbed to the top of the career ladder in companies without a gender quota as being better than that of their male peers, researchers said.

Economists from the Technical University of Munich (TUM) and the University of Hong Kong studied the share price development of companies following the exit of top managers due to death or illness in a sample of around 50 countries.


They looked at around 3,000 cases in 51 countries where no gender quota requirements were in place during the selected period (1998 to 2010). “Our approach may seem a little morbid, but it allowed us to minimise the influence of other factors,” said Daniel Urban, of the Technical University of Munich.

The study shows that share prices fell by two per cent on average following the sudden departure of a woman director. In cases where a woman was replaced by a man, there was an even bigger drop of three per cent. Conversely, when the departing board member was a man, the share price remained steady.

“Women who have reached the highest management level without the help of a mandatory gender quota therefore contribute more value to a firm than their male peers,” said Urban. The second part of the analysis shows that shareholders do not value women per se more highly. Rather, they evidently judge the actual performance delivered by a firm’s executive and supervisory boards.

The researchers came to this conclusion by looking at the representation of women on the executive and supervisory boards of companies in the countries studied. The proportion was just three per cent in Japan, eight per cent in US and 20 per cent in the Philippines.

In those countries where it was particularly hard for women to make it to the top, there was a bigger fall in the share price following their departure. “This effect reflects the harsh selection process, whereby women have to deliver significantly better performance than their male peers. So their departure then produces a correspondingly greater impact,” said Urban.

“Firms need to improve their processes for selecting board members. Above all, they should apply the same standards for both men and women. By putting women managers on an equal footing, they could increase their firm’s value,” said Urban. The findings also indicate that gender quotas have a negative impact.

“Our investigation shows that this by no means indicates that women generally make less competent supervisory board members,” said Urban. “Rather, the quota has resulted in a situation where the best executives have not always been selected for the job,” he said.