New research from Robert Naess, a portfolio manager at the Scandinavian bank Nordea, finds that companies with female CEOs or chairmen outperformed the broader market. Ulta's chief executive, Mary Dillon, took the helm in 2013 and has annualized returns of 26 percent, according to Naess. (Frazer Harrison/Getty Images)

In recent years, some financial services companies have been adding investment products that place bets on women-led firms, investing in companies that have either female chief executives or diverse boards of directors. New research from Scandinavia's largest bank shows why the wager might be a good one.

Companies with a woman in the chief executive or chairman role have performed far better than a major global index over the past eight years, according to an analysis by the bank Nordea of nearly 11,000 companies globally. The results, first reported by Bloomberg, found that on average, companies with a woman in either of those two top jobs at the end of the calendar year more than doubled the performance of the MSCI World Index in the following year. The annualized return for female-led firms, based on an equal weighting, was 25 percent since 2009, compared with just 11 percent for the broader market.

“It’s not one year that’s doing the work,” said Robert Naess, a portfolio manager at Nordea based in Bergen, Norway who did the analysis. Over the eight years he studied, he said in an interview, there was “only one year where they lagged the market.”

Naess' study adds to a growing body of research aimed at examining whether gender diversity has an effect on corporate performance. Some studies show a link: Credit Suisse, for example, has found that having a woman on the board was associated with better performance, and that having more female top managers was associated with higher returns on equity, valuations and payout of dividends, as well as better stock performance. Other studies, meanwhile, have shown less clear links, with one study showing the stock price of Norwegian companies dropped after adding female directors to meet a mandate that 40 percent of the country's corporate boards be female — the drop was attributed in part to less experienced directors.

Naess's analysis examined publicly traded companies from developed and emerging markets that had at least $2 million in stock trading each year from both developed and emerging markets. He looked at nearly 400 companies over the period in which women held one of the two roles, examining how the performance of the company fared in the following year if a woman was chief executive at the end of the year prior.

As the co-portfolio manager for a $40 billion fund that invests in “quality” companies with more stable earnings and less volatile stocks, Naess suggested a few possible explanations for the findings. One is that for whatever reason, women may tend to lead more of these less volatile companies. According to his numbers, about four percent of the companies had a female leader in the broader market, compared with nine percent of companies on an index that tracks these more stable firms.

Another possibility, he said, is that analysts tended to have slightly lower earnings growth expectations for the companies in his data set with a woman at the helm — at an average of 7.4 percent, versus 9.7 percent for the broader market. Again, while the reason for that is unclear, analysts overshoot expectations frequently, he said. Because the actual average earnings growth is only about 5 percent a year, the women's performance could be seen as less disappointing, which could lead to stronger stock performance.

In a follow-up email, Naess said the explanation could also simply be that the women were better managers. “The simple interpretation of my calculations is to buy the companies with a female chief executive/chair,” he wrote. “If you invested consistently in only companies with a female chief executive/chair, then you would have done better than the market.”

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