# **3.2.2 Base results**

The results in Panel A of Table 4 suggest that female-managed firms have 15% higher _arpk_ than their male counterparts (column 1), a figure comparable to 12% for the United States (Morazzoni and Sy, 2022). The gender difference in the average return to capital is explained by more traditional countries, where women-managed firms have a 23% higher return to capital compared to menmanaged firms (Panel B). In less traditional countries, the estimated coefficient is positive and smaller, but not statistically significant. These results may be interpreted as a sign of capital misallocation for women-managed firms. Said differently, female-managed firms could potentially benefit from increased levels of capital to align their relative returns with those of male-managed firms in the same industry. By comparison, there is no evidence of gender differences in the empirical indicator of labor market misallocation, measured as the logarithm of the average return of labor (Appendix Table A.7). Furthermore, the coefficient on the alternative indicator of capital misallocation, 1+ _κ_ , is also positive, although not statistically significant this time (column 2).

Table 4: Capital misallocation by gender

||All fr|ms|Firms wi|th debt|
|---|---|---|---|---|
||log(arpk)<br>(1)|1+_κ_<br>(2)|log(arpk)<br>(3)|1+_κ_<br>(4)|
|_A. All countries_|||||
|Female|0.137|0.067|0.146|0.141|
||[0.056]**|[0.093]|[0.103]|[0.101]|
|Obs|21,411|21,411|3,222|3,222|
|R2|0.181|0.109|0.257|0.231|
|_B. By social perceptions about women_|||||
|<br>Female in less traditional countries|0.045|0.033|0.012|0.029|
||[0.093]|[0.115]|[0.110]|[0.099]|
|Female in more traditional countries|0.23|0.102|0.485|0.423|
||[0.070]***|[0.162]|[0.242]**|[0.253]*|
|Obs|21,411|21,411|3,222|3,222|
|R2|0.181|0.109|0.26|0.235|

Sources: World Bank Enterprise Surveys and World Value Surveys. Notes: The sample includes 61 countries, of which 28 are classified as more traditional and 33 as less-traditional. All models control for manager experience, indicators of firm age, legal status, size, whether the firm exports, whether it has financial statements certified by external auditors, the percentage of the firm that is privately owned, and industry, country, and year fixed effects. Standard errors are clustered at the country level. *** significant at 1%, ** at 5%, * at 10%.

The finding that female-managed firms receive loans of lower value compared to similar malemanaged firms despite being more profitable on average may partly explain the higher _arpk_ in firms managed by women. If this were indeed the case, then capital misallocation would appear stronger in firms that apply for and receive credit. In fact, this appears to be particularly true for traditional countries using both indicators of misallocation (Columns 3 and 4 in Panel B of Table 4), where the coefficients are larger and significant compared to the full sample.<sup>23</sup> These results suggest that reducing gender bias in accessing loans of higher value would have broader ramifications for capital misallocation.

> 23We check the robustness of our results across different samples by restricting to (i) firms that apply for credit; and (ii) those that apply but the credit application was rejected. We confirm evidence of gender-based capital misallocation using both measures in more traditional countries across all samples. Results are available upon request.

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