Investing in Asian companies with a higher proportion of female managers leads to benchmark-beating returns, according to a study by BofA Securities.
A basket of the MSCI Asia Pacific Index’s members with the highest proportion of women in management posted average five-year returns that were four percentage points higher than the benchmark, the report found. These stocks also outperformed a portfolio of companies with the fewest women in management by 26 percentage points over the same period, strategists including Girish Nair and Matty Zhao wrote in a report.
The BofA analysis of returns since 2010 is the latest to suggest diverse leadership can contribute to corporate success. A McKinsey & Co. report noted that companies where at least 30% of executives are women are more likely to outperform compared with those with smaller proportions of women in leadership. Credit Suisse Group AG noted in a 2021 report a “diversity premium,” as gender diverse boards and executive leadership correlated positively with superior corporate and stock performance.
“Along with bringing diverse experience, knowledge, skill-sets, and perspective, data suggests greater gender diversity in management brings additional alpha,” the BofA strategists wrote, referring to returns above benchmarks. Stocks with more women managers also have 22% lower weighted average cost of capital, and had returns on equity that were 2% higher on average than the bottom quintile since 2010.
Investors including BlackRock Inc. and State Street Global Advisors have pressured companies to add women to their boards and to senior management roles. Women made up more than 24% of the board members of MSCI AC World Index companies in 2022, according to an MSCI Inc. study released last week, compared with about 18% in 2018.
Still, the levels of disclosure on the metric are low. About a quarter of companies in Asia reported the gender breakdown of their management teams in 2022, and the numbers show that women make up just 25% of the roles in the region, BofA’s study found. Pay gap issues remain, with women earning 83 cents on average for every dollar earned by men, and are particularly glaring in China, South Korea and India.
