New research from KSA Group shows that male-owned businesses were over 40% more likely to go into insolvency In the year to October 2022 than those run by females.
LONDON, Nov. 23, 2022 /PRNewswire-PRWeb/ -- New research from KSA Group shows that male-owned businesses were over 40% more likely to go into insolvency between October 2021-22 than those run 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 run riskier businesses?
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 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?
Are women just better at business?
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.
There is also some interesting research into how female entrepreneurs perceive risk: https://centreforentrepreneurs.org/releases/women-entrepreneurs-show-appetite-for-growth/.
However, research conducted 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.
Clearly, more studies could be done in this area to see if there really are any gender influences in business failures.
Given that many business failures are caused by not acting early enough and not taking advice then the old cliché that men don't follow instructions or ask for help in many aspects of their lives may just be true in their roles as Directors of companies. Another possible explanation is that men are more prone to risk-taking and that will inevitably lead to higher insolvencies.
About the Study
For this analysis, KSA Group researched Creditsafe's database of four million companies in the UK.
In order to do the analysis, two lots of four data sets were collected:
Data Set 1
- A count of all active companies with just two men on the board or a majority of 75% of the board that have been actively trading in the last 12 months [579,832].
- A count of boards containing just two women or a majority of 75% of the board that have been actively trading in the last 12 months [67,047].
- A count of all companies that went into administration or liquidation in male-run businesses as above [4,870 companies went into liquidation, compulsory liquidation (winding up order) administration or appointment of liquidators from October 2021].
- A count of all companies that went into administrator or liquidation in female-run businesses as above [397 companies went into liquidation, compulsory liquidation (winding up order) administration or appointment of liquidators from October 2021].
Businesses with a gender LESS than 75% were excluded.
Data Set 2
- A count of all active companies with just one man on the board that have been actively trading in the last 12 months [1,776,275].
- A count of companies containing just one woman on the board that have been actively trading in the last 12 months [539,861].
- A count of all companies that went into administration or liquidation in male-run businesses as above [19,262 companies went into liquidation, compulsory liquidation (winding up order) administration or appointment of liquidators from October 2021].
- A count of all companies that went into administrator or liquidation in female-run businesses as above [4,196 companies went into liquidation, compulsory liquidation (winding up order) administration or appointment of liquidators from October 2021].
In 2018, KSA Group ran a similar study. The results can be seen here: https://www.companyrescue.co.uk/guides-knowledge/news/uk-sme-companies-run-by-women-are-less-likely-to-go-bust-than-companies-run-by-men-4182/
About KSA Group Limited
KSA Group Ltd t/a Company Rescue
KSA Group are Turnaround Experts and Insolvency Practitioners.
Through our website http://www.companyrescue.co.uk we provide high quality, easy to understand advice on turnaround and insolvency problems. The website is supported by trained advisors who can explain what solutions are available to your problems.
The KSA group Ltd has offices in Berwick, Gateshead, Birmingham and the City of London.
Keith Steven is the managing director of KSA Group Ltd - a specialist firm of turnaround practitioners. Over 5,000 people have contacted KSA since Keith launched this unique website in 2000 and over 500 companies have now been directly assisted by the author over the last 22 years with assignments ranging from large multi-national projects to small recruitment firms.
Eric Walls - MIPA FABRP National Director of Turnaround and Insolvency
Eric Walls is a licensed insolvency practitioner regulated and licensed by the Insolvency Practitioners Association. His ethos is always "give the right advice, choose the right options, rescue first if possible." He has many years' experience in accounting and insolvency having trained at Touche Ross (Deloitte) and has been involved in turnaround and insolvency since the early 90's. Eric gained his licence in 2002 and has been involved in many innovative turnarounds as well as hundreds of liquidations, administrations and bankruptcies across the whole of the UK.
Wayne Harrison – London Director of Insolvency
Wayne is also a licensed insolvency practitioner who is regulated and licensed by the IPA. He has over 20 year's insolvency experience and heads up our London office. He has extensive experience of corporate and personal insolvency, which culminated in him being appointed by the IPA to oversee the regulation of insolvency practitioners. He joined the IPA in 2003 where he was part of the team that developed and implemented its "Better Regulation Framework", and he managed its regulatory operations for three years before making the decision to return to insolvency practice with KSA Group in 2009.
Robert Moore, KSA Group, 44 07584583884, [email protected]
SOURCE KSA Group