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Financing Profile: Women Entrepreneurs (October 2010)
Financial performance
Results from previous research on the financial performance of majority female-owned firms have been mixed. While some studies have suggested that businesses owned by women have underperformed compared with businesses owned by men (Fairlie and Robb 2009, Fischer et al. 1993), other studies have produced evidence suggesting that after controlling for factors such as business size, business age and industry effects there is no difference between the two gender groups in terms of financial performance (Watson 2002, Kalleberg and Leicht 1991). Using linked tax file data, weighted annualized average growth rates in total revenue and full-time equivalents (employees) were calculated from 2004 to 2008 (Tables 13 and 14).Footnote 10 As mentioned earlier, the financial performance of a firm can be heavily influenced by initial aspirations for growth. Therefore, growth rates are compared not only across gender but also across growth intentions and financing activities.
Majority female-owned firms that intended to grow in 2004 posted significantly larger growth in total revenue and full-time equivalents (employees) than majority female-owned firms that had no growth intentions
As shown in Table 13, total revenue grew more slowly among majority female-owned SMEs than majority male-owned SMEs regardless of financing activities or growth intentions. Nevertheless, majority female-owned firms that sought financing or had growth intentions in 2004 were able to produce a respectable annualized growth rate of at least 3.6 percent. In sharp contrast, majority female-owned firms with no growth intentions saw total income grow by only 0.9 percent. This discrepancy in growth performance is even larger for majority male-owned firms (6.7 percent versus 1.2 percent for firms with growth intentions and firms with no growth intentions respectively). Thus, notwithstanding the differences in total revenue growth performance between majority female-owned and majority male-owned firms, there is a strong connection between initial growth intentions and actual total revenue growth regardless of gender.
| SME Category | Majority Female-Owned | Majority Male-Owned |
|---|---|---|
|
Source: Tax file data linked to Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2004. |
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| Firms that sought financing | 3.6 | 5.4 |
| Firms that did not seek financing | 2.1 | 4.1 |
| Firms that intended to grow | 3.9 | 6.7 |
| Firms that did not intend to grow | 0.9 | 1.2 |
The influence of growth intentions is also apparent in comparisons of growth in full-time equivalents (employees), especially among majority female-owned firms (Table 14). Majority female-owned firms with growth intentions were very active in boosting staff size (7.6 percent growth rate), whereas majority female-owned firms with no growth intentions actually reduced their numbers of employees (-5.3 percent). In addition, majority female-owned firms with growth intentions were also much more likely to hire new employees than majority male-owned firms. These results suggest that majority female-owned firms with growth intentions are playing an important part in job creation in Canada.
| SME Category | Majority Female-Owned | Majority Male-Owned |
|---|---|---|
|
Source: Tax file data linked to Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2004. |
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| Firms that sought financing | 7.4 | 2.9 |
| Firms that did not seek financing | -2.5 | -1.0 |
| Firms that intended to grow | 7.6 | 1.4 |
| Firms that did not intend to grow | -5.3 | -0.6 |
Footnotes
- Footnote 10
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Growth rates were calculated only for incorporated firms that reported figures for both 2004 and 2008. Consequently, the results presented in Tables 13 and 14 do not include unincorporated SMEs or SMEs that were no longer in existence in 2008. To calculate the weighted growth rates, aggregated figures by gender group in each year were utilized.
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