UK SMEs with Women on the Board are Less Likely to go Bust, According to New Research

Insolvency Practitioners, KSA Group Limited, who run the website www.companyrescue.co.uk, has found that companies with mixed boards are less likely to become insolvent than those with all male boards, and all female boards.  KSA looked at the insolvency rate of the UKs 1.5m companies with 2 or more directors in the last 12 months to June 2019.

Key Findings

• The insolvency rate is 49% higher in all male boards than mixed boards.
• The insolvency rate 32% higher in all male boards when compared with all female boards

The insolvency rate for male-dominated boards was 0.63%, for female boards it was 0.48% and for mixed boards, it was 0.43%. So, it appears that mixed boards are more likely to avoid insolvency than either all male or all female run companies.  The full report can be seen at this page https://www.companyrescue.co.uk/guides-knowledge/news/uk-smes-with-women-on-the-board-are-less-likely-to-go-insolvent-according-to-new-research-4373/.

As a recent study by Morgan Stanley found, firms which have a more gender equal board, have outperformed their less diverse peers by 2.8% per annum, in the last eight years.

Types of Insolvency

Liquidations account for the vast majority of insolvencies.  Administrations only accounted for 10% of insolvencies, which reflects the fact that administrations are more for larger businesses. Interestingly only 9 female-run companies used this tool, compared to 452 male-run companies.  This is most likely due to the fact that there are very few large all female run companies.

Break down by Industry Sector

A break down by industry sector of the companies shows there is no large difference in the industry sectors between the different board types.  All male boards are more common in the construction industry, which does have a higher overall insolvency rate, but it is not enough to demonstrate that it is the male dominated construction companies becoming insolvent that are responsible for the  overall discrepancy.  Mixed boards are more common in the administration and services sector but they also have a high insolvency rate.

Other analysis highlighted that 25% of all insolvencies occurred in the London area.  However, interestingly a higher proportion of women run businesses that became insolvent were based in London.

Robert Moore, Marketing Manager for KSA Group, said; “This is the second year that we have researched the role of gender in the insolvency rates of SMEs.  Last year we found that female dominated boards had a lower insolvency rate than male dominated boards.  This year we looked at the role of gender diversity and found that mixed boards had lower insolvency rates than both all male and all female boards.  Whilst it is not possible to prove that women are better at running businesses than men, the body of evidence is growing that companies which have women on the board do reap benefits in terms of increased profitability and less corporate failures. “