Published on Let's Talk Development

Exploring the relationship between gender and insolvency

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A female shop owner. | © A female shop owner. | ©

Research on gender differences in attitudes towards risk and behaviors in competitive environment suggests that women may be more “risk-aware” and “risk-averse” than men.  This may lead to women being more thorough and pragmatic in the management of risk, and more likely to be involved in monitoring-related committees and are more likely to attend meetings. Studies have also shown that female and male directors differ systematically in their core values and risk attitudes. While some research suggests that men may be more likely to take excessive risks, which could lead to higher profits or higher risks of insolvency, there is no significant negative correlation between women and insolvency. In fact, several studies have shown a positive impact of women on company operations, which can help to reduce the chances of insolvency.   

For instance:

  • Researchers have studied women CEOs’ role in hotel management and survival. The main finding was that women CEOs increase hotels’ survival rate. A sample of 2615 Spanish hotel companies was examined during the period 2005–2018 for how their survival was affected by the variables of financial aspects, years of experience and the principal hotel executive’s gender. The results indicate that some financial variables, such as sales, working capital to total assets ratio and each company’s experience, influence hotel businesses’ survival.
  • In another study, the characteristics of the directors and owners of private companies in relation to insolvency risk were examined, with a specific focus on the incidence and impact of female directors. The results provide compelling positive evidence of a relationship between the gender composition of directorships and insolvency risk.
  • The composition of the board of directors is highly relevant to a firm’s capital structure and likelihood of financial distress. Having a small and independent board with a high ratio of women directors reduces the likelihood of financial distress. For a sample of European firms over the period 2002 to 2019, it was found that the percentage of women directors is the most influential board characteristic in terms of capital structure decisions. This characteristic is negatively related to leverage, cost of debt, and debt maturity.
  • KSA Group Limited, one of the UK’s leading insolvency practitioners, has researched the UK SME market of over 4 million businesses in an attempt to see if there was a gender bias on the board of companies that become insolvent. Main findings showed that:
  • Insolvency rate is 70% higher in male run companies, even though 8 times as many companies are run by men than women.
  • Only 12 out of 347 companies that went into insolvency administrations were female run. The study was designed to investigate if the insolvency rate was higher for male or female-run companies.  In the first study of its kind in the UK, companies were investigated to determine the gender of the board of companies that had either gone into administration or liquidation over the last twelve months, to see if there was any correlation between gender and the general financial health of a business.

Gender in Judiciary

When it comes to the judiciary, there is no literature to suggest a correlation between gender and insolvency resolution or restrictions on holding judiciary positions related to insolvency.  However, the number of women in the judiciary has significantly increased worldwide in recent decades, with women making up more than 54% of professional judges in OECD countries. Women’s participation varies across countries, for example in Italy (52.9 percent) El Salvador (48.7 percent), France (70.9 percent), Germany (44.5 percent), Uganda (44 percent), Spain (40 percent) and the USA (34.7 percent). The situation is different in such countries as in Kuwait where there are no female judges, while in Iraq only 7.6 percent, and in Nepal 3.8 percent of all judges are women.

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Maria (Maika) Chiquier

Private Sector Development Specialist

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