with stricter social and cultural norms, women-managed firms face higher credit constraints on the intensive margin compared to other firms. Cultural barriers, such as explicit discrimination in allocation of credit or implicit bias that limits access to information and network opportunities, or requires additional guarantors (Brock and De Haas, 2023), may explain our results.

_Third_ , there is suggestive evidence of distortion in allocation of capital away from women-managed firms, particularly in countries with more restrictive gender social and cultural norms. For instance, using the average revenue product of capital as an indicator of capital misallocation, female-managed firms have a 15% higher average return than male-managed firms. Finally, we formally illustrate that female-led firms could benefit from accessing higher levels of credit.

The paper beyond this point is organized as follows. Section 2 summarizes the data description and Section 3 presents the estimation strategy and the base results, followed by additional robustness checks. Section 4 concludes with some policy implications.

# **2. Data and Measurement**

This section outlines the data sources used in our research and presents some of the descriptive stylized facts from this data.

## **2.1 Firm-level data**

Our main source of data is the World Bank Enterprise Surveys (WBES) which are nationally representative surveys of formal firms with 5 plus employees.<sup>5</sup> Although the WBES covers both manufacturing and services, our sample is limited to the manufacturing sector only because capital is not reported for the latter. Beyond surveying a wide range of countries, the survey instrument used in WBES includes several questions on access to finance for firms. These questions can help in understanding the sources of finance; the reasons for not applying for formal finance; rejection of credit application, if they do apply; collateral requirements; and the loan amount received, conditional on successful application.

To measure differences by gender at the firm level, most studies use the gender of the firm owner, sometimes even restricting to sole proprietorship firms (e.g., Alesina et al. (2013)). Other studies define a threshold of female ownership such as considering a firm as female-owned when at least one of the owners is a woman (e.g., Aterido et al. (2013)).<sup>6</sup> However, female ownership does not necessarily reflect the participation of women in the decision-making process, especially in large firms with many owners (Piras et al., 2013). In order to capture the role of women in managing the performance of a firm, we take advantage of the information on the gender of the firm’s top manager available in the WBES.

> 5 WBES micro-data, including a comprehensive cross-country harmonized dataset, are publicly available at https://www.enterprisesurveys.org/en/enterprisesurveys. We use the last comprehensive dataset released on June 2023 containing information for the period 2008-2023.

> 6Piras et al. (2013) highlight that restricting the analysis to sole proprietorship reduces the sample size and the types of firms. In addition, using a threshold to classify a firm as female-owned implies a degree of arbitrariness.

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