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(Photo: iStock)
(Photo: iStock)

Do women manage firms better than men?

Women-managed firms have higher revenues and returns on asset and capital compared to firms run by men, says a study

Mumbai: Countries globally strive for greater representation of women on corporate boards for the sake of gender equality. A growing body of evidence suggests that this may be a good move for corporate performance as well.

A study in Vietnam, authored by Cuong Viet Nguyen and Tung Duc Phung of the Mekong Development Research Institute, shows that firms managed by women are more profitable and efficient compared to those run by men.

Using data from the 2011 and 2013 enterprise censuses in Vietnam, the authors find that, on an average, women run smaller firms compared to men. So, the profits and revenues of such companies seem lower compared to those run by men.

However, once adjusted for firm size, female-managed firms show higher revenues and return on investment, compared to those run by their male counterparts. In other words, women chief executive officers (CEOs) tend to run their firms more efficiently than their male counterparts, given the same level of capital.

Interestingly, female-managed firms are also more likely to employ women and provide social insurance to workers. This phenomenon is not fully explained by industry differences. Having a female CEO increases the proportion of women workers in a firm by 11.2 percentage points, the study shows.

This finding provides evidence for the “revolving door" hypothesis, which suggests that having a woman in top management may increase opportunities for other women to join the firm and climb up the ladder.

Also read: Do Male CEOs Really Run Firms Better than Female Counterparts? New Evidence from Vietnam

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