Study Finds Companies with Women Board Members Perform Better, Through Good Times and Crises


Sep 18, 2019


It makes a difference when women are in boardrooms: their presence among a company’s directors “helps temper the overconfidence of male CEOs, improving overall decision making for the company,” according to the authors of a new study, writing in Harvard Business Review (HBR).

Women as board members not only envision returns on acquisitions better, in turn, helping companies close deals that will be successful in the future, but with them around, male peers make less aggressive and less impulsive decisions, the study noted. The presence of at least one woman board member means a diversity in viewpoints that improves firm decision-making, “…especially when complex issues are involved because different perspectives can increase the amount of information available,” the authors write.

Male CEOs’ overconfidence — assessed based on the risks they took expecting them to be good for the company but which turned out to damage the company — may cause them to overcommit the company’s resources. “So, by reducing CEO overconfidence, female board representations may also result in less aggressive investment policies and better acquisition decisions,” the authors write.

Previous research has found when women are in prominent positions, returns on acquisitions are 2% higher than for acquisitions that are finalized and closed by male executives. Second, the same study reported, compared to men, female board members also more thoroughly evaluate risks of investing the company’s money.

Researchers in this newest study assessed 1,629 listed firms in the U.S. and scrutinized their performance between the years 1998 and 2013. In the sample taken into account, women made up only 10.4% of the board members and only 2.9% of CEOs. The researchers then studied if the male CEOs in the sample showed any difference in their level of confidence when women were among the board members and if it affected in any way how corporate decisions were made or how the company performed. They noticed that male CEOs in companies with at least one woman board member were less likely to take risky chances regarding investments or acquisitions.

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Researchers also studied how the stocks of 516 companies performed in the financial crisis of 2007 to 2009, concluding female representation on a company’s board reduced the negative impact of the crisis. “… CEOs of firms with female board representation were less likely to adopt aggressive strategies that made their firms more vulnerable to the crisis,” the authors write. “Firms that did not have female board representation suffered a greater drop in performance on these measures.”

In India, under the Companies Act of 2013, it is mandatory for companies with a turnover of Rs 300 crore of more that are listed on any stock exchange to have at least one woman director. Still, their representation in top positions, overall, is abysmal. Indian women hold just 12.4% of board seats and a meager 3.2% of board chairs as of 2017, per a Deloitte survey titled “Women in the Boardroom: A Global Perspective – Fifth Edition.” The figures were arrived at after assessing Indian companies that met the criteria mentioned by the Companies Act 2013.

However, in positive news, another survey titled Most Inclusive Companies Index (MICI) 2019 has projected that the number of women in leading business roles will grow to 25% by 2025, although the number is still far from achieving equality in the number of male and female board members.


Written By Anubhuti Matta

Anubhuti Matta is an associate editor with The Swaddle. When not at work, she’s busy pursuing kathak, reading books on and by women in the Middle East or making dresses out of Indian prints.


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