New research from KSA Group shows that insolvent companies were over 40% more likely to be to run by men between October 2021-22 than by females.
The study, which looked at the insolvency rate of companies with a 75%+ male or female board, showed that male-dominated companies went bust at a rate of 0.84%, versus 0.59% for majority-female companies.
This means that companies were 42% more likely to become insolvent if their boards were male-dominated.
The study also considered single-director companies, which had a higher overall insolvency rate than companies with two or more directors. Here too, company failure rates were higher for men than women, with insolvency rates of 1.08% and 0.77% respectively (a 30% difference).
Overall insolvencies up 200% post-COVID
Does the COVID pandemic have any bearing on these results, given that overall insolvencies have rocketed by 200% since 2018?
It seems the gender difference was already in play, and in fact was more pronounced before the pandemic. When KSA Group ran its 2018 insolvency study, male-dominated businesses were 70% more likely to enter insolvency than female-dominated firms.
The failure rate of female-owned businesses has increased threefold since the pandemic (from 0.20% to 0.59%), but this has increased less sharply for male-owned businesses (0.34% to 0.84%).
Key findings in 2021/22:
- Insolvency rate is over 40% higher in male-run companies
- Four times as many companies are run by majority men than women
- Overall insolvency rate in both groups has increased by a factor of 200%
Do men operate Businesses with more risk?
Are men less competent at running businesses than women, or could there be another explanation?
Robert Moore, from KSA Group, points out that men might simply gravitate towards more risky business sectors: “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 less effective at running businesses than women. It may well be that the types of businesses that men tend to run are more vulnerable to insolvency.”
For example, construction was the most represented industry within male-dominated business insolvencies, accounting for 24% of all business failures looked at by the study. By contrast, only 7% of the female-dominated company insolvencies were in the construction sector.
As depicted in the pie charts, there are other noticeable differences in the sectors of male versus female-dominated company insolvencies, with a more even split of industries across the latter. This does suggest that a greater range of businesses are now at risk of insolvency: a legacy, perhaps of the pandemic and the subsequent economic shock?
We did not collect data on the overall percentage of each industry across all active (non-insolvent) companies, so it is difficult to draw conclusions on whether this is a sector-specific commercial debt problem.
It should be noted that the gap between the performance of men and women run businesses has narrowed since 2018. The pandemic has perhaps hit a much wider range of businesses and made profitable and stable companies suddenly unviable. Could it be that women who may, in a normal economy, take fewer risks in business than men, suffer disproportionally more when there is a massive external shock.