Women led companies less likely to become insolvent

Is it just a coincidence that a lot of companies becoming insolvent, going into liquidation or administration appear to be managed by a male dominated board? Not according to latest data published by Creditsafe.

According to recent research conducted by Creditsafe and an analysis of the data, companies with a female led board, experienced a rate of 3.67% insolvency rate compared to companies with a male dominated board who faced a 5.10% insolvency rate. The study revealed that male dominated companies were 39% more likely to become insolvent versus women led companies.

There could be a whole host of factors that contribute to this recent research, notably the lack of women on Board of Directors and the nature of business male-dominated companies operate within. Are the latest statistics evidence of women being more effective than men in the world of business? Creditsafe’s data director, Drew Fahiya, does not think this is necessarily the case. Drew suggests that the higher insolvency rates among male dominated companies could be because of the nature of business typically led by men.

Creditsafe also reported that whilst there has been a steady increase in the number of women on the board of directors in recent years, 2023 saw a slight decline. Whilst the recent data suggests having more gender diversity on the board is beneficial to the success of a company, there is still a long way to go to achieve parity especially given the 3% increase in companies with exclusively male directors compared to 2019.  

Perhaps the UK could learn from India who retains its title of the world’s fastest growing major economy as it expanded 8.3% in the last 3 months of 2023. India have experienced a growth in women Directors and a decline in male only Boards. According to the 4th Annual Corporate Governance Survey by Excellence Enablers Private Limited as of 31 March 2023, there where only 2 companies without an independent women Director compared to 12 in 2021 and the percentage of women among the total Directors in the top 100 companies was the highest since 2018-2019 — rising to 19 per cent from 15 per cent earlier.

Perhaps India’s growth in the number of women directors is partly due to legislation. Under s.149(1) of the Companies Act 2013, every listed company must have at least 1 woman Director. Indian companies with a turnover of RS300 crore (approx. £29m) and Public companies with a paid up share capital of RS100 (approx. £9.5m) crore are also mandated to have 1 woman director on their Board. Furthermore, according to Regulation 17 (1)(a) of the Securities and Exchange Board’s Listing Obligations and Disclosure Requirement, 2015, the Board of Directors shall have an optimum combination of Executive and Non-Executive Directors with at least one-woman Director and not less than 50 per cent of the board shall comprise Non-Executive Directors.

Whilst there is still a long road to gender parity, according to Creditsafe’s data director, there is mounting evidence that companies with female board members tend to enjoy advantages such as increased profitability and reduced failure rates.