Women leading family-owned firms increases profitability, says study

A new study has suggested that female chief executives “significantly improve” the profitability of family-owned companies, particularly when there is a large number of women on the board.

The paper, called Gender Interactions Within the Family Firm, explores the transitions from male to female chief executives of family-owned companies in Italy over the period 2000-2010.

It found that the “female incoming CEOs positively affect corporate profitability as the fraction of female directors increases” – especially in smaller firms.

This means that when women executives operate within a female-dominated environment, they are less reserved and more likely to work better and therefore increase profitability.

According to the research, a “female-friendly corporate culture” means that women are more likely to team up and co-operate to promote a more efficient use of resources, which also boosts profitability.

Overall, the study said that a female-oriented board, together with a female CEO, could improve profitability by 6.5-7.6%.

However, the study suggested that when companies are large or promote a conservative image of women in society, the interactions between female CEOs and directors is less profitable.

The study also argued, “The profitability effect of female interactions is stronger for female directors that are not affiliated to the controlling family, who are typically more likely to be appointed following a meritocratic selection rather than based on family ties.

“This suggestion is reinforced since we find that female interactions are less effective in areas where traditional family values dominate.”

Recent figures revealed that the percentage of women on FTSE 100 company boards hit 27% for the first time – but only four of these companies have female CEOs.

Further reading:

Government considers all-female shortlists for FTSE 100 companies

Women play a key role in helping make the investment world sustainable

Number of women on FTSE 100 boards above 20% for first time

Global gender gap getting narrower, as women seek equal footing

Percentage of female City managers has doubled in the last year