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Companies with women on their executive and supervisory boards are valued more highly by stock markets and their departure has a bigger impact than that of men, according to a new study.
Economists from the Technical University of Munich 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.
Daniel Urban from TUM and Thomas Schmid from the University of Hong Kong studied the share price movements of companies following the exit of executive or supervisory board members due to death or illness. 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).
The study shows that share prices fell by two percent 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 percent. 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,” claims Urban.
They also showed that shareholders do not value women per se more highly, but judge the actual performance delivered by a firm’s executive and supervisory boards. In countries where it was particularly hard for women to make it to the top, there was a bigger fall in the share price following a woman’s 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,” says Urban.
The economists conclude that firms 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,” they say.
They also suggest that gender quotas have a negative impact on performance. Urban says: “Our investigation shows that this by no means indicates that women generally make less competent supervisory board members. Rather, the quota has resulted in a situation where the best executives have not always been selected for the job.”