IMF study: corporate profitability positively associated with women in senior positions

posted in: Economics | 1

On International Women’s Day it’s nice to report some more interesting research from the International Monetary Fund (IMF), this time showing that gender diversity in senior corporate positions is positively associated with corporate profitability.


The IMF authors (Lone Christiansen, Huidan Lin, Joana Pereira, Petia Topalova and Rima Turk) studied the gender diversity and profitability of 2 million companies in Europe. They found a statistically significant positive correlation.

The representation of women is poor: for the top 600 European companies in 2014, on average only 19% of board seats and 14% of senior executive roles were filled by women. Just 4% of CEOs were women. There is a lot of national variations though (see chart below).

Female senior corporate positions

Previous studies have found mixed evidence, and lack statistical significance, in terms of the relation of women’s roles to profitability. The new IMF study is far larger because it includes non-listed companies (99% of the total), a sample of 2 million companies in total, mainly derived from local chambers of commerce data.

The authors find that:

  1. there is a positive association between gender diversity in senior roles and corporate profitability, measured by return on assets;
  2. the effect is greater in two sorts of companies – those with a large proportion of female employees; and those in knowledge-intensive industries.

Showing that correlation also involves causation is always difficult but the authors’ larger dataset allows them to conclude more confidently that their results imply that putting more women in senior roles would raise corporate profitability. “The estimated boost to profitability is relatively small but highly statistically significant. Exchanging just one male member of the senior management team/board for a female member would be associated with 8–13 basis points higher ROA, or about a 3–8 percent increase in profitability.”

So that is one less excuse for not doing something about it.

  1. Betty

    Thank you for the information, Simon. It would be fun to superimpose a profitability graphic on the one already used to see how ROA increases with women’s senior participation. Certainly companies differ across the geographies but perhaps one could use a particular sector e.g. banking/financial services, study ROAs across the board, and visually draw the comparison between participation and profit.

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