Wanted: undervalued shares

Women as yield killers? I found this headline in a business newsletter. It came along with a picture of a crying blonde. The content was about an Insead study which states that share prices fall as soon as a woman is appointed to the non executive board. Pardon me? She hasn’t done anything for the company yet, and she’s already been found guilty of falling stock prices. Just because she was elected. Oh, women on boards are useless, if not to say dangerous. This study proves that, right?

 

Stock prices are a leading indicator. Sober algorithms, professional analysts, investors and traders influence stock prices with their expectations of success. Apparently they have less confidence in women than in their male counterparts and let their disdain rule their willingness to pay for stocks. Now one might object that they do this in a qualified manner, i.e. with the experienced knowledge that women on boards actually cause damage to the company. However, the same study finds that only share prices are falling. Operating performance remains stable. Other studies even show that when more than one woman has been integrated into the company’s board, the performance is above average compared to the industry. I draw three conclusions.

  1. The influence of individual board members on company performance is overestimated in the financial industry.
  2. The financial industry tends to make misjudgements when women come to the carpet floor.
  3. The financial industry is less rational and logical than we would like to believe.

That is why I find the perception and automatism with which women are pilloried for a harmful phenomenon for which the financial industry itself is responsible: unreflected stereotypes that lead to objectively unjustified market distortions.

A safe investment strategy

And now for the good news. There is a safe investment strategy: buy shares in companies that elected the first woman to their non executive board and whose shareprices have fallen thereafter. According to the findings of this study, the shares are undervalued.

Column by Esther-Mirjam de Boer, CEO of GetDiversity in the  Handelszeitung of 12 December 2019.

who wants to know a little more about it:

The article: https://www.finews.ch/news/finanzplatz/39059-banken-versicherungen-frauen-rendite-investoren-diversitaethttps://www.finews.ch/news/finanzplatz/39059-banken-versicherungen-frauen-rendite-investoren-diversitaet

Link to the Insead study: https://www.researchgate.net/publication/336198885_Women_Don’t_Mean_Business_Gender_Penalty_in_Board_Composition

And here is access to one of the many studies that document the correlation between greater diversity and better operational performance: https://www.credit-suisse.com/about-us-news/de/articles/media-releases/cs-gender-3000-report-shows-one-fifth-of-board-positions-globall-201910.html

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