Companies with more women in management outperform their male-led peers, according to Goldman Sachs

Companies with more women in management outperform their male-led peers, according to Goldman Sachs
Brendan McDermid/Reuters
  • A new study by Goldman Sachs found that companies with more women in management and board positions outperformed their more male-led counterparts.
  • In a basket of 600 European stocks, companies with more female leadership saw their share price outperform on average by 2.5% a year compared with companies with less women leaders.
  • "Having a greater proportion of women in senior positions is not just a diversity score to target...but is associated with a lower cost of equity, stronger share-price performance and lower volatility of shares," Sharon Bell, a Goldman equity strategist said.
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It pays to have more female corporate leadership, according to a new study from Goldman Sachs.

After examining the stock performance of companies within the European Stoxx 600 index since the 2008 financial crisis, the bank found that those with higher numbers of female leadership outperformed their more male-led peers. Companies in the top quartile of their sectors based on the share of female managers or women on the board outperformed companies in the bottom quartile by 2.5% a year.

Sharon Bell, a Goldman Sachs European equity strategist, led the study and summarized her findings in a Monday Op-Ed in the Financial Times.

"Having a greater proportion of women in senior positions is not just a diversity score to target or a box to be ticked, but is associated with a lower cost of equity, stronger share-price performance and lower volatility of shares, too. Good news for corporations, investors and society," Bell said.
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She also noted that correlation doesn't mean causation, and the fact that companies in the top-quartile for share of women in leadership outperformed could be from several factors.

"It could be that women add more diverse opinions and take different approaches. It could be that by hiring from a broader pool that includes both sexes, companies are able to attract the best talent," said Bell.

Read more: Alex Umansky has been one of the world's best stock pickers for years, and his fund is making 6 times more than the competition in 2020. He told us the 4 pillars to his investing approach.

The percentage of female board members in Europe's top 600 companies has increased in the last 20 years, but the share of female managers has not risen at the same speed, according to Goldman. Roughly 30% of Stoxx 600 board members are female, but just 6% of all CEOs are female. And while some sectors including retail, media, travel and leisure, healthcare and financials have more female employees than males overall, all sectors have fewer than 50% female managers.

Companies with more women in management outperform their male-led peers, according to Goldman Sachs
Goldman Sachs


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The study also revealed that during the pandemic, companies with more female leadership tended to perform worse.

According to the study, from the end of February 2020 to the end of September 2020, companies in the top quartile by women on the board were down 7% compared with companies in the bottom quartile. Bell said this drop could be because companies with more service businesses, the sector hit hardest by social distancing, tend to have a higher share of women employees.

Goldman Sachs first published the study, titled "Womenomics: Europe Moving Ahead," in mid-October.

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