Credit Suisse Research Institute report: ‘Gender diversity and corporate performance’

As noted in an earlier post, proponents of ‘improved’ gender diversity in boardrooms have already started to misrepresent the Credit Suisse Research Institute report, ‘Gender diversity and corporate performance’, published last month, taking carefully selected extracts and using them to infer a positive causal link between… you know the rest. A link to the report is here.

We’re hoping to meet with Credit Suisse people shortly to explain how (in our view) the report is flawed in some areas, so we’ve decided not to publicly post a detailed critique at this stage. We feel one point is worth making, however. Remarkably, the report makes no mention of the Ahern/Dittmar study on the impact of quotas in Norway (2011) for the University of Michigan, nor the Deutsche Bundesbank study (2012), both of which show a negative causal link between… you know the rest.

Should you encounter anyone stating (or even implying) that the Credit Suisse report shows a causal link, I suggest you refer them to the following extract on page 17 of the report:

There is a significant body of research that supports the idea that there is no causation between greater gender diversity and improved profitability and stock price performance. Instead the link may be the positive signal that is sent to the market by the appointment of more women: first because it may signal greater focus on corporate governance and second because it is a sign that the company is already doing well.

Adams and Ferreira (2009) looked at the impact of greater gender diversity on 1,939 US stocks between 1996 and 2003. On the face of it, their data showed positive gender diversity effects. However, using two different techniques to handle reverse causation, they found statistically significant negative effects on profits and stock value following the appointment of women to the board.

Farrell and Hersch looked at 300 Fortune 500 companies between 1990 and 1999 and showed that firms with strong profits (ROA) are more likely to appoint female directors but that female directors do not affect subsequent performance.

So increasing female representation on boards will have either (at worst) a negative impact on corporate performance, or (at best) no impact. The report’s hardly the ringing endorsement for their cause which proponents of GDITB are claiming, is it? As always, we’re left with the inescapable conclusion that GDITB is nothing other than a dangerous and anti-meritocratic left-wing social engineering initiative.

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