There have been several studies proving that women-led firms tend to perform better than those that are led by men as they produce superior returns. In the latest 2019 Fortune 500 list, it was found that 33 of the companies were led by female CEOs. The ratio may seem low, but the numbers show a considerable increase from 2018’s total of 24 women-led firms.
A report by The University of California-Davis shows that the top 25 firms in California that had the highest number of female executives and board members have a 74 percent higher return on assets and equity.
Women’s leadership in the C-Suite has proven its worth. Female executives’ involvement in their respective firms has shown high numbers in the stock market and better profitability performance.
Women Leaders and the Stock Market
In terms of stock market performance, S&P Global published a report analyzing the data of earnings and share price of 5,825 recent executive appointments, where 578 of these are female execs. The analysis studied corporate data that were published from 2002 to 2019. The firms included were all based in the United States.
In the U.S., for every female CEO, there were 19 male execs. The study also found that in 2018, there were 6.5 male CFOs per woman in the role. Research data showed that within two years after a new CEO appointment, the stock price for firms that designated female chief executives outperformed companies that appointed men by a median of 20 percent.
For females appointed as CFOs, companies found different advantages. The report discussed that female CFOs pilot more value appreciation. The women leaders also maintain moats that create profitability, and they also delivered surfeit risk-adjusted returns for their companies.
After 24 months of a female CFO’s appointment, these firms outdid those that have newly-appointed male CFOs by 8 percent in terms of share price returns. On profitability, they also outperformed by 6 percent.
Ethan Powell, CEO of Impact Shares, told CNBC that S&P’s data were not surprising since it is expected that companies that empower women will outperform in the long run as they embrace diversity and empower stakeholders regardless of their gender, ethnicity, or race.
S&P’s study also supports a report published by Credit Suisse, where Swiss investment bank analysts reviewed data from 3,000 companies worldwide. The findings showed that firms with more female management had a higher degree of profitability, and stock market performance is also better.