Impact of Business Owners’ Ethnicity and Gender on Financial Performance A classical analytical review and empirical study on how the demographics of company owners impact the results.

Abstract

Previous research has found that female- and minority-owned businesses generally underperform compared to male- and nonminority-owned businesses on a variety of measures, such as sales and profit. The situation is, however, rapidly changing while there is a lack of up-to-date research on the current situation. Available research often has a narrow approach, trying to explain the big picture by looking closer at specific cases. This paper presents recent statistics on sales and profit inequalities among more than three million American private companies, with respect to gender and ethnicity. The data used is from the Annual Survey of Entrepreneurs from 2016 which covers all Americanowned employee firms with yearly sales above USD 1000. Furthermore, this paper discusses what the underlying reasons are that result in the presented inequalities. When looking at the income inequalities of American private companies, it is clear that male- and nonminority-owned companies outperform their femaleand minority-owned counterparts. This is apparent due to the statistically significant higher share of profitability, and in both cases more than twice the average yearly sales. The study also finds a result contradictory to previous research, in that it does not find that female-owned companies are concentrated in less profitable industries. Contrariwise, the study found that the femaleowned companies studied are slightly overrepresented in industries that have a high share of profitability.