Further evidence of the role of gender in financial performance

Citation

Marlow, S. (2005), "Further evidence of the role of gender in financial performance", International Journal of Entrepreneurial Behavior & Research, Vol. 11 No. 5, pp. 385-387. https://doi.org/10.1108/13552550510615024

This article adds to the growing literature which explores the impact of gender on the financial performance of small firms. The study on which the paper is based reflects work undertaken in 1998 by Fasci and Valdez which examined the performance of small accounting practices in the USA. Fasci and Valdez drew on data from questionnaires administered to 604 male and female accountants using regression analysis to determine the degree to which gender might impact upon performance. From their study, Fasci and Valdez found the gender had the greatest affect on economic performance along with issues such as the owner's previous experience, marital status, hours worked and the site of the business. It is agreed that this study provides useful insights into the manner in which gender might influence performance but Collins‐Dodd et al. suggest there are a number of weaknesses. So, for instance, it is argued that issues such as the motivation for engaging in sole practice require investigation as do differences in regional economic performance and the CPA qualifications which differ from state to state. Regarding the dependent variable employed, Collins‐Dodd et al. suggest that notion of “profit ratio, defined as gross revenues divided by net profit” used as an indicator is too crude. Given that many sole practices are very small, in terms of employment, and might have few tangible assets given the nature of the service offered, this may not be the best manner in which to assess performance. The paper also describes a study undertaken by Watson (2002) which explored the impact of gender upon firm performance. This paper made a substantial contribution to the literature as rather than just crudely comparing performance and gender, the research considered outputs in respect of inputs to the business; consequently, although Watson found that female‐owned firms did not perform as well as their male‐owned counterparts per se, they did in fact demonstrate similar degrees of output in terms of business inputs. As such, it was not the case that women had poorer owner management skills but they had fewer resources to work with in the first instance. Whilst this study did use a large sample, Collins‐Dodd et al. suggest that a failure to control for geographical differences may have masked or exaggerated differences while the input and output measures may not be appropriate for very small firms, such as accounting practices, given that typically, such ventures have very few assets.

Recognising the limitations of these studies, Collins‐Dodd et al. (p. 399) aim to “build on and extends the previous studies of the financial performance of small businesses and owner's gender”. The authors achieve this by controlling for owner and business characteristics, locality and issues such as motivation for business entry. The paper explores a number of hypotheses that focus around these issues with the aim of assessing the impact of gender on financial performance. The latter aspect is measured by two dependent variables – gross revenue dollars and net profit dollars – hence two regressions were run to capture productivity and managerial efficiency. A considerable range of independent variables was employed to capture the characteristics of the business, of the individual, of motivation for self‐employment and issues of control over life and career. From a list of Canadian accounting public practitioners for 1999, 206 useable responses were achieved, divided equally between men and women. From the findings it emerged that male‐owned firms earned higher gross revenue dollars and were more profitable but when this was assessed from the degree of satisfaction with gross revenue, few differences were found. In terms of the business characteristics, male‐owned firms had more full‐time employees, were more likely to located in business premises, worked for longer hours and were more likely to be located in larger cities. Men were also older, had more experience and were more likely to have attended university. In terms of motivations for sole practice, again differences emerge with women rating work life balance as importance whilst men were likely to be motivated by maximising financial income. When assessing how gender directly impacted on performance in terms of the measures, the authors suggest that the link here is weaker. From the findings, the authors agree that there were differences between male‐ and female‐owned sole practitioners on a range of variables explored moreover: “female‐owned accounting practices earned less gross revenue and had significantly less net profit than did male‐owned practices” (p. 410) but it was emphasised that both groups were satisfied with performance and success. While there is some discussion then regarding the details of the findings – including the fact that those employed in female owned firms appeared to work harder for their employers, surprisingly, the authors are not convinced that the differences they find are associated with gender. It is stated that: “while there were significant differences between female and male owned public accounting practices … these differences were not attributed directly to gender once we controlled for other variables”.

It is agreed that the differences which emerge here are associated with issues such as business size, location and hours worked – ostensibly, these are not linked to gender. However, if these findings are placed within the context of the wider literature regarding gendered disadvantage links between performance and gender become more apparent. There is a tendency within the small firm literature to consider the economic activity involved as primary. Yet, it is acknowledged that social characteristics, whether they be gender, race, age, class etc critically affect life chances and particularly, economic activities. As such, it is difficult to see how gender cannot affect the experience of business ownership and despite the uncertainty expressed by the authors, this would appear to be the case here. Further questions need to asked to uncover the underlying reasons why women operate their business as they do – so why do they work shorter hours, why are they less financially motivated, why do prioritise flexibility? Within the wider, waged work literature, these issues are well explored regarding the dual burden of domestic and waged labour, sexual stereotyping and socialisation affects. It would be bizarre that if by entering self‐employment women could some how shed the disadvantage associated with gendered assumptions and characteristics. While this research makes a useful addition to the literature, particularly with its considered methodological approach, it might be argued that placing the results in a broader, multi‐disciplinary context may shed more light on the findings.