Examining board gender diversity and equity market performance


Across all sectors, the average number of women in board leadership roles and women NEOs is less than one.

Do gender-diverse boards and executive teams really make a financially material difference to companies and capital markets?

“While numerous studies in recent years point to “yes,” we decided to put these theories to the test, using rigorous quantitative factors,” says Yijia Chen, ESG Quantitative Research Analyst, Calvert Research and Management, an affiliate of Eaton Vance.

Calvert’s new research titled ‘Evaluating the financial materiality of gender diversity factors’ examined the financial materiality of five distinct gender-diversity factors with relatively good data coverage.

The research looked at how these factors affected U.S. and non-U.S. equity markets and assessed diversity impacts, controlling company size (capitalisation), country and sector.

Ms Chen notes: “Some studies we examined showed that a more gender-diverse executive team has a stronger impact on company performance than the gender of the CEO.[1] Other studies linked diverse boards and executive teams to better risk management and, in some cases, improved performance results.[2],[3],[4]

To assess these claims, we conducted three-year back tests on the materiality of five factors:

  • Number of female board members
  • Percentage of female board members
  • Number of women in board leadership roles
  • Number of women named executive officers (NEOs)
  • TruValue circumstantial score related to diversity and inclusion news/issues[5]

We found that gender-diversity factors show strong efficacy in equity returns for both U.S. and international markets. More specifically, for U.S. large-cap companies, the TruValue circumstantial score related to gender and inclusiveness news/issues was the major driver of superior equity performance. For U.S. small-cap companies and non-U.S. markets, board-level gender diversity was the driving performance factor.

Across all sectors, the average number of women in board leadership roles and women NEOs is less than one, which implies that most companies do not put any women in the three-to-five most important company roles. While women’s voices are starting to be heard on corporate boards, their opinions are not as influential in leadership teams.”

Other highlights include:

  • For U.S. large-cap companies, female representation in executive leadership roles (i.e., NEOs) is as important as representation on the board
  • From a sector perspective, energy is the laggard, with the lowest female representation on corporate boards and in executive leadership roles
  • On the other side, utilities is the leading sector, with the most women on corporate boards and in leadership roles

On the whole, our comprehensive, back tested research confirms the findings of prior studies citing the impact of gender diversity on corporate financial performance. The research showed that gender diversity can have a significant impact on equity returns. The circumstantial score related to gender and inclusiveness news/issues is one of the major drivers of equity performance for U.S. large-cap companies, while board-level gender diversity helped drive results for U.S. small-cap companies and non-U.S. markets,” notes Ms Chen.


[1]”Female CEOs on a Glass Cliff? A Look at Gender Diversity and Company Performance,” ISS Analytics, 10/26/18: https://www.issgovernance.com/library/female-ceos-on-a-glass-cliff/
[2] “The Bottom Line: Connecting Corporate Performance and Gender Diversity,” Catalyst, 2004: https://www.catalyst.org/system/files/The_Bottom_Line_Connecting_Corporate_Performance_and_Gender_Diversity.pdf.
[3] “Why Diversity Matters,” McKinsey & Company, January 2015: https://www.mckinsey.com/~/media/mckinsey/business functions/organization/our insights/why diversity matters/diversity matters.ashx
[4] “Delivering through Diversity,” McKinsey & Company, January 2018: https://www.mckinsey.com/~/media/mckinsey/business functions/organization/our insights/delivering through diversity/delivering-through-diversity_full-report.ashx
[5] The TruValue Insight Score is a measure of a company’s longer-term ESG track record, similar to a ratings system, designed to reflect the enduring performance record of a company over time. Scores are derived using an exponentially-weighted moving average of the ESG performance, and the half-life of an event’s influence on the Insight score is 6 months. The Insight Score is an aggregated result of relatively positive and negative news about one company, with 50 as neutral, above 50 as overall positive, and below 50 as overall negative.

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