The results are clear: companies run by women perform far better than the market.
Nordea analysed nearly 11,000 publicly traded companies across the globe over the last eight years. The results showed that on average companies with a female chief executive officer or a female head of the board of directors had a 25 per cent annualised return since 2009, more than double the 11 per cent delivered by the MSCI World Index.
“If you invested in a company with a woman at the helm, you would have outperformed the market,” says Robert Næss, the portfolio manager at Nordea who designed the study.
“Other studies have also shown that diversity is a positive factor, but not that many have also looked at CEOs or such a large number of companies,” says Næss. He notes that most previous studies have looked at the board of directors as it is easier to collect data on this.
The Nordea team studied companies across industries and geographies in both developed and emerging markets with good liquidity – a trading volume of at least USD 2 million a day. Of the nearly 11,000 companies, only close to 400 had either a female CEO or a female chairperson at year-end during the period 2006-16.
The performance of the stock of these companies was calculated for the following year based on an equal weighting for the year, which gives the same weight, or importance, to each stock instead of stocks being weighted based on their market capitalizations.
Næss also noted that they found a higher number of companies with female CEOs in the United States, China and India. “This had a positive effect on the overall numbers,” says Næss, adding: “When you’re testing a trading strategy on historical data to ensure its viability, there is always the possibility that the strong results could be a coincidence.”
Positive factor for investments
It is difficult to say exactly why having women at the helm of a company resulted in higher returns, but Næss mentions several possible explanations. One explanation is that because it is often more difficult for a woman to become a CEO or a chairperson, only the very best make it to the top. In fact, 96 per cent of the companies surveyed had a male CEO and chairperson, while only 4 per cent had a woman as the CEO, chairperson or both.
Another reason could be that companies with a good track record are more likely to hire top female executives, whereas struggling companies may go for the “safe” bet of hiring a man.
It could also be that women are better managers. Women may also be more careful in their projections than men so that when they actually deliver on what they promise, it has a positive effect on the share price.
Whatever the reason, the result – the positive effect of female corporate leaders – is encouraging. “This is a positive factor that we will take into account when looking into investing in a company,” Næss says.
Næss, who is based in Bergen, Norway, manages USD 42 billion in stocks at Nordea, the largest bank in the Nordic region and one of the largest in Europe. He is also the co-portfolio manager of the Nordea Global Stable Equity Fund, which is slightly overweight in companies run by women. The fund returned 14 per cent a year over the last five years and was voted one of the best funds in several countries, including France, Spain, Norway, Finland, Belgium, Italy and Portugal, by Morningstar in 2016.
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