Companies run by women are less likely to go insolvent than companies run by men

Companies run by women are less likely to go insolvent than companies run by men

11 Mar    Finance News, In Business

New research suggests that companies led by women exhibit a lower likelihood of insolvency compared to those led by men.

Analysis of insolvency rates between January and December 2023 by Creditsafe revealed that businesses with male-dominated boards faced a 5.10% insolvency rate, while those with female directors experienced a notably lower rate of 3.67%.

This discrepancy indicates that companies with predominantly male boards were 39% more likely to face insolvency than their counterparts with female representation. The study also observed a steady increase in the presence of female directors within UK companies, with a 7% rise in 2023 compared to 2019. This indicates progress in terms of gender diversity in business leadership, either with women leading businesses individually or as part of management teams.

However, while the number of female directors had been steadily rising, there was a slight decline observed in 2023. This fluctuation could be attributed to various factors, including economic conditions, policy shifts, or societal influences, mirroring similar trends observed in business insolvencies during the same period. Conversely, there was a 3% increase in companies with exclusively male directors compared to 2019.

The persistent gap between the counts of female and male directors underscores the ongoing challenges in achieving gender parity in business leadership roles. Drew Fahiya, Creditsafe’s data director, suggests that the higher insolvency rate among male-run businesses may not necessarily reflect on their effectiveness compared to women. Factors such as the nature of businesses typically led by men, which may be more susceptible to insolvency, could contribute to this trend.

In 2023, a total of 30,199 UK businesses faced some form of insolvency action, marking a significant 52% increase compared to 2021. Despite this, Drew Fahiya emphasizes that while it’s challenging to definitively conclude that women are inherently better at running businesses than men, mounting evidence suggests that companies with female board members tend to enjoy advantages such as increased profitability and reduced failure rates.

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