Female leaders matter for the bottom line

A Nordea Markets analysis finds that companies with more gender-diverse leadership have more stable returns.

Companies with a more gender-balanced leadership have more stable returns. That’s the result of an analysis by Nordea Markets based on a sample of 100 Nordic blue-chip companies that examined how gender diversity affects the performance, and hence value, of large companies.

“We found that the volatility of return on capital was much lower for companies with greater gender diversity in their leadership,” says Johan Trocmé, Director of Thematics in Nordea Research.

The results, reported in the latest issue of Nordea On Your Mind, showed that the companies with the most gender-diverse management had 40 percent lower volatility in ROCE (return on capital employed). The companies in the study with more gender-diverse boards of directors also had significantly lower volatility in returns, although the results were most striking at the group management level.

We found that the volatility of return on capital was much lower for companies with greater gender diversity in their leadership.

- Johan Trocmé, Director of Thematics, Research Insights, Nordea Research

But does gender diversity matter when it comes to value creation?

Yes, says Trocmé, pointing to the broader universe of European small and mid-cap stocks. Nordea Markets found that the top 10 percent of those stocks generating the most stable ROCE outperformed the rest of the total group by 75 percent over 17 years.

“Such massive outperformance in our view suggests that having a lower volatility in return on capital is appreciated and rewarded by equity investors,” Trocmé adds.

The researchers also found that one in three board members of the 100 Nordic blue-chip companies are now female – a doubling from 2004 to 2016, with Norway leading the way after introducing mandatory female quotas over 10 years ago.

Read the latest Nordea On Your Mind, including interviews with senior Nordic business leaders, to find out why diversity matters from a business perspective.

And watch the webinar, recorded on 21 February, where Johan Trocmé and Ellen Benktander dive into the report’s main findings:

Previous issues of Nordea On Your Mind:
24 Feb 2018: Nordea On Your Mind: Nordic housing hiccups
18 Dec 2017: Nordea On Your Mind: Capex – a once-in-a-decade opportunity
27 Nov 2017: Nordea On Your Mind – Retail apocalypse: The growth of e-commerce

Johan Trocmé | Director, Thematics | +46 101 56 34 22 | Analyst info
Ellen Benktander | Analyst, Thematics | +46 101 57 28 87 | Analyst info

For disclosures and disclaimers, please click this link.

Nordea Markets is the name of the Markets departments of Nordea Bank AB (publ) and its branches Nordea Danmark, filial af Nordea Bank AB (publ), Sverige, Nordea Bank AB (publ), filial i Finland and Nordea Bank AB (publ), filial i Norge. The information provided herein is intended for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. The views have been provided solely based on the information made available to Nordea Markets and for the purposes of presenting the services made available by Nordea Markets. This notice does not substitute the judgement of the recipient. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. Relevant professional advice should always be obtained before making any investment or credit decision. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets. This transmission is intended solely for the person or entity to whom it is addressed. It may contain privileged and confidential information. If you are not the intended recipient, please be notified that any dissemination, distribution or copying is strictly prohibited. If you have received this transmission by mistake, please let us know and then delete it from your system.

Further reading