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UK Companies Run By Women Are Less Likely To Go Bust Than Companies Run By Men According to Research Undertaken by Insolvency Practitioners KSA Group Limited

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UK Companies Run By Women Are Less Likely To Go Bust Than Companies Run By Men According to Research Undertaken by Insolvency Practitioners KSA Group Limited

In the first study of its kind in the UK, companies were investigated to determine the gender of the board of companies that had either gone into administration or liquidation over the last twelve months to see if there was any correlation between gender and the general financial health of a business. KSA Group found that businesses run by a majority of men were 70% more likely to bust than those run by women.

PR Newswire

LONDON, Aug. 31, 2018 /PRNewswire-PRWeb/ -- KSA Group Limited, one of the UK's leading insolvency practitioners, in conjunction with Creditsafe, is the largest provider of business credit information in the world, has researched the UK SME market of over 3m businesses in an attempt to see if there was a gender bias on the board of companies that become insolvent.

The study was designed to investigate if the insolvency rate higher for male run companies? In the first study of its kind in the UK, businesses were investigated to determine the gender of the board of businesses that had either gone into administration or liquidation over the last twelve months to see if there was any correlation between gender and the general financial health of a business.

It was found that the insolvency rate of male dominated businesses was 0.34% and those in female dominated businesses was 0.20%. So, the insolvency rate is 70% higher in male run businesses. Most interesting was the difference in companies that were likely to go into administration as opposed to liquidation. Administration is a more complex and costly insolvency mechanism and is more likely to be used on larger businesses which are dis-proportionally more male dominated but the fact that out of 347 administrations in our data sets only 12 were female dominated.

What conclusions can we draw from these findings?

Robert Moore at KSA Group said; "It is apparent that the insolvency rate is higher in male run businesses, but this may be due to a number of factors that have nothing to do with whether men are inherently worse at running businesses than women. It may well be that the businesses that tend to be more likely to become insolvent due to the nature of the industry or recent economic events are coincidentally run by men."

However, the study found that only real estate and letting businesses are overly represented in the data set of female dominated businesses that have become insolvent. See pie Charts which has categorised businesses into the established Standard Industry Classification

So are there any other reasons why we should not read too much into these figures and start saying that women are better at avoiding insolvency than men.

  • First of all, the difference in size of each data set is substantial with only 1 in 8 SME businesses being run by 75% or more women. Therefore, the insolvency rates calculations are done on different sized data sets.
  • We have only analysed one years of data.
  • We have not taken into account all the types of businesses ie those with perhaps 2 women and one man on the board.
  • Single director companies are not included
  • The data does not include businesses run by partnerships

It is interesting to note however that this is a much higher ratio than even women on the boards of publicly listed companies. Only 7 FTSE 100 companies have women as CEO's although they do make up about 19% of directors of FTSE 100 companies.

Notes to Editors

Creditsafe is the largest provider of business credit information in the world with data on 240 million companies.
KSA Group are licensed insolvency practitioners with offices based in London, Gateshead, and Berwick upon Tweed. KSA Group runs the website https://www.companyrescue.co.uk which is the longest established insolvency website with guides for worried directors.

About the Study

Robert Moore (Marketing Manager) and Rebecca Dunne (an intern from the University of Hertfordshire) worked with Creditsafe to analyse their database of 4m UK companies.

In order to do the analysis 4 data sets were collected.

  • A count of all active companies with just 2 men on the board or a majority of 75% of the board that have been actively trading in the last 12 months.
  • A count of boards containing just 2 women or a majority of 75% of the board that have been actively trading in the last 12 months.
  • A count of all companies that went into administration or liquidation in men run businesses as above.
  • A count of all companies that went into administrator or liquidation in female run businesses as above.

Single person directors were excluded and businesses with less than 75% gender bias. The thinking behind this was that single director companies are made up of a significant amount of personal service companies that are not small businesses employing people and needing complex financial controls but just a way of paying less tax. In addition, certain rule changes in the last year has led to large increases in insolvency rates of personal service companies to do with allowable expenses.

The question of whether male or females are better at running businesses has been researched in America https://journals.aom.org/doi/abs/10.5465/256305 The researchers found that there was no discernible difference. However, research done after the financial crisis did show that female run banks were less likely to go bust https://link.springer.com/article/10.1007/s10551-014-2288-3 

 

SOURCE KSA Group

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