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Female board members add to bottom line, study shows

Tuesday, August 7, 2012  
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Public companies with female board members perform significantly better than those with all-male boards, according to a study by Credit Suisse Research Institute.

Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, the report said.

The number of women in boardrooms has increased since the end of 2005 as countries such as Norwayinstituted quotas and companies have added women directors after drawing criticism for a lack of gender diversity. Eighty-six percent of U.S. companies had at least one woman on their board of directors last year, compared to 59 percent globally, according to the study. In 2005, only 73 percent of U.S. companies and 41 percent of global companies had women on their boards.

The research, which includes data from 2,360 companies, suggests mixing genders may temper risky investment moves and increase return on equity. "Companies with women on boards really outperformed when the downturn came through in 2008,” Mary Curtis, director of thematic equity research at Credit Suisse and an author of the report, told Bloomberg Businessweek. "Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.”

Net income growth for companies with women on their boards has averaged 14 percent over the past six years, compared with 10 percent for those with no female director, according to the study, which examined all the companies in the MSCI ACWI Index.The net-debt-to-equity ratio at companies with at least one female director was 48 percent, compared with 50 percent at all-male boards.

Larger companies have a higher proportion of women on their boards, as well industries close to consumer and the health-care industry, the study shows.

Consumer and health-care companies "are slightly more defensive companies anyway, but even within that we found that stocks in the health-care sector and the consume-staples sector, which had some level of gender diversity on the board, were generally outperforming their peer group,” Curtis said.




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