July 29, 2021 Global Indicators Briefs No. 2 Female-owned Firms during the COVID-19 Crisis Marie Hyland, Nona Karalashvili, Silvia Muzi, and Domenico Viganola T his brief uses rm-level data, collected between May 2020 and May 2021 in 41 countries, to provide descriptive evidence on the di erential e ect of the COVID-19 crisis on female- and male-owned rms. Data suggest that while female-owned and male-owned businesses closed permanently at the same rates, female-owned rms were more likely to have temporarily closed during the crisis and to have closed for a longer duration. When able to stay in business, female-owned rms were more likely to experience a decrease in demand for their products or services and supply of intermediate inputs than male-owned rms. ey also reduced the size of their workforce more than their male counterparts and were more likely to reduce hours worked. Finally, female-owned rms su ered deeper nancial distress than male-owned rms. Nevertheless, female and male-owned rms show similar optimism of returning to normal levels of sales or workforce in the near future. Evidence on the Effects of the COVID-19 Crisis that female-led rms tend to be more concentrated in the on Female-owned Firms is Still Limited retail sector (Amin and Islam 2014), which, together with other services sectors, is considered to have been hit During the COVID-19 pandemic, rms in nearly all particularly hard by the COVID-19 sectors have experienced drastic demand and supply crisis—understanding the precise impact of the crisis on shocks, negative e ects on sales and employment women-led rms is particularly relevant to design policies (Apedo-Amah et al. 2020; Bloom et al. 2020; Karalashvili to support vulnerable businesses. and Viganola 2021), and nancial fragility (Amin and Viganola 2021). e evidence on the e ect of the is brief compares the experiences of rms with COVID-19 crisis on female-led rms, however, is still majority female ownership (female-owned rms) with limited, as is the literature on the e ects of economic crises rms with majority male ownership (male-owned rms) more generally on female-led rms. During the during the COVID-19 crisis. It uses rm-level data COVID-19 pandemic, rms run by female top managers collected before the crisis through the World Bank in 24 countries worldwide have been more likely to Enterprise Surveys (WBES) and the COVID-19 remain closed on a temporary basis – and to stay closed Follow-up Surveys that contacted the WBES rms again longer, than businesses run by men (Liu, Wei, and Xu since the onset of the pandemic. e data are described in 2021). During the 2009 nancial crisis, female-owned box 1. Firms are de ned as majority female-owned if, at rms were more likely to close permanently. ey also the time of the precrisis WBES, at least 51 percent of the experienced a higher reduction in sales, in the longer term, rm was owned by women. All di erences discussed in compared to male-led rms (Ahmed, Muzi, and Ueda the brief were tested for statistical signi cance after 2020), and a more pronounced tightening in credit accounting for rm’s size, age, sector, and within country supply (Cesaroni, Lotti, and Mistrulli 2013). During the location, along with the timing of the surveys. e 2009 nancial crisis, female business leaders were also di erences were all found to be signi cant at the 5 percent more pessimistic about the future than male business or 1 percent level. leaders (Cesaroni, Sentuti, and Buratti 2015). Given that rms led by women tend to be smaller and Female-Owned Firms Experienced More less productive than rms led by men (Bruhn 2009; Temporary Closure and Widespread Shocks to Bardasi, Sabarwal, and Terrell 2011; Islam, Palacios Demand and Supply Lopez, and Amin 2019), to su er more limited access to nance (Muravyev, Talavera, and Schäfer 2009; Temporary closures were more common among Presbitero, Rabellotti, and Piras 2014) in general—and female-owned than male-owned rms. e data enable Affiliations: Marie Hyland, World Bank Women, Business and the Law. Nona Karalashvili, World Bank Enterprise Analysis Unit. Silvia Muzi, World Bank Enterprise Analysis Unit. Domenico Viganola, World Bank Enterprise Analysis Unit. For correspondence: mhyland@worldbank.org, nkaralashvili@worldbank.org, smuzi@worldbank.org, dviganola@worldbank.org. Acknowledgements: We are grateful to Jorge Luis Rodriguez Meza, David C. Francis, and Mohammad Amin for helpful comments, and Nancy Morrison for excellent editorial assistance. Objective and disclaimer: Global Indicators Briefs synthesize existing research and data to shed light on a useful and interesting question for policy debate. Global Indicators Briefs carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions are entirely those of the authors. They do not necessarily represent the views of the World Bank Group, its Executive Directors, or the governments they represent. DECIG – Global Indicators Briefs No. 2 Box 1 Firm-level Data Collected during the COVID-19 Pandemic e World Bank Enterprise Survey (WBES) e WBES are rm-level surveys of a representative COVID-19 Follow-up Surveys were conducted with sample of rms in the non-agricultural, non-extractive, rms that had recently completed the WBES before the and formal private sector with ve or more employees. onset of the pandemic. In the Follow-up Surveys, a total Survey weights are applied to obtain population of 36,367 rms across 41 countries were interviewed estimates. When data are aggregated across countries, between May 2020 and May 2021, with 26 countries only the latest rounds of surveys are used, and survey covered in two rounds of surveys, approximately three months apart. Table B1.1 summarizes the coverage. weights are rescaled so that each country is weighted Cross-country comparisons should be treated with due equally. All the rm-level WBES and follow-up data are caution, given that the surveys were conducted at publicly available on the Enterprise Surveys (ES) data di erent points of time in di erent countries. portal: https://login.enterprisesurveys.org. Table B1.1. WBES Follow-Up Survey Data Used in this Brief Countries Surveys Obs. Fieldwork range Low-income 5 5 1,205 06-2020/01-2021 Lower-middle-income 8 15 8,202 05-2020/02-2021 Upper-middle-income 13 17 9,534 06-2020/05-2021 High-income 15 30 17,426 05-2020/02-2021 Total 41 67 36,367 Source: World Bank Enterprise Survey (WBES) Follow-up COVID-19 Surveys. Note: Obs. = observations. the computation of di erent measures of rm exit. e assumed permanently closed (for an in-depth analysis on rst measure refers to rms that have closed temporarily rm exit during the pandemic, see Muzi et al. 2021). since March 2020 due to the pandemic but did not go out Figure 1 illustrates the three measures of exit for female- of business. e second and third measures capture rm and male-owned rms. Looking at rates of permanent permanent exit from the market. e second measure closures, the data show that female-owned rms are not includes the rms con rmed to have closed permanently. characterized by higher rates of con rmed (2.6 percent e third measure, less conservative, also includes rms and 2.5 percent) or assumed exit rates (18.9 percent and that could not be recontacted and, therefore, were 17.2 percent) compared to male-owned rms. However, Figure 1 Firm Exit Rates during the COVID-19 Crisis by Female or Male Ownership and Firm Size Female-owned rms are more likely to have temporarily closed during the COVID-19 crisis, but both female- and male-owned rms closed permanently at the same rates. 0 10 20 30 40 50 60 All firms, Majority female owned All firms, Majority male owned Small (5-20), Majority female owned Small (5-20), Majority male owned Medium (20-99), Majority female owned Medium (20-99), Majority male owned Large (100+), Majority female owned Large (100+), Majority male owned % of firms confirmed permanently closed % of firms confirmed or assumed permanently closed % of firms that have ever temporarily closed during the COVID-19 outbreak Source: World Bank Enterprise Survey (WBES) Follow-up Surveys on COVID-19. Note: The figure covers the latest round of survey for the 41 countries in the sample. Small, medium, and large refer to the number of employees in the firm. 2 DECIG – Global Indicators Briefs No. 2 Figure 2 Demand and Supply Shocks to Female- and Male-owned Firms during the COVID-19 Pandemic Female-owned manufacturing and other services rms reported more widespread incidence of decrease in demand and supply. a. Percent of firms with decreased demand b. Percent of firms with decreased supply 75 71.2 70 66.6 67.3 65.6 65.0 65 64.0 62.4 61.5 60.3 59.2 58.5 60 57.5 56.7 54.2 55.0 55 53.4 50 Full sample Manufac. Retail Other Full sample Manufac. Retail Other services services Majority female owned Majority male owned Source: World Bank Enterprise Survey (WBES) Follow-up Surveys on COVID-19. Note: The figure covers the latest round of survey for the 41 countries in the sample. di erences emerge when looking at the rates of rms that same month of the previous year. Focusing on the have temporarily closed their business at any time during decrease in demand, relevant di erences emerge across the COVID-19 outbreak: overall, among female-owned sectors ( gure 2). In the manufacturing sector (other rms the rate of rms that closed for more than a week is services), 67.3 percent (71.2 percent) of rms with almost 7 percentage points higher than that of majority female ownership experienced a demand male-owned rms (54.7 percent vs. 47.8 percent, decrease, compared to 61.5 percent (65.6 percent) of respectively). Moreover, female-owned rms are male-owned rms. e pattern is the opposite for retail, characterized by a longer duration of closure: on average, where female-owned rms were less likely to experience a they had to put their businesses on hold for an additional negative demand shock compared to male-owned rms week compared to male-owned rms (11 weeks and 10.1 (60.3 percent vs. 62.4 percent). weeks, respectively). ese patterns hold for small, medium, and large rms. Employees at Female-owned Firms Fared Focusing on rms that survived, it is relevant to look Worse Relative to those in Male-owned Firms at the measures they put in place during the COVID-19 e WBES COVID-19 Follow-up Surveys show outbreak to o set the di culties of the crisis. that, across a range of metrics, workers in Interestingly, female- and male-owned rms appear establishments owned by women experienced more similar in the ways they adjusted their overall operations adverse outcomes. is is not surprising given the to meet the crisis: namely, to start or increase online aforementioned higher likelihood that female-owned activity; to adjust or convert their production or the rms temporarily closed during the crisis, and that they services they provide; or to introduce new products or were disproportionately adversely a ected by both services in response to COVID-19. However, demand and supply shocks. As gure 3 illustrates, 38.8 female-owned rms appear less well positioned to move percent of female-owned rms decreased the number of their employees to remote work (28.3 percent vs. 33.1 permanent full-time workers they employed since the percent of male-owned rms). onset of the COVID-19 crisis, compared to 35.7 percent Female-owned rms experienced a greater of rms that are owned by men. Female-owned rms also incidence of a decrease in demand (66.6 percent vs. cut the size of their workforce signi cantly more in 64.0 percent) and in supply of inputs (59.2 percent vs. response to the crisis. e average change in the number 56.7 percent). e decrease in demand (supply) is of permanent, full-time employees was -8.8 percent in measured as the percentage of rms that experienced a female-owned rms, compared to -6.4 percent in rms decline in the monthly demand for the rm’s products or owned by men. e data also suggest that workers in services (supply for the rm’s inputs) compared to the female-owned rms are not more likely to be leaving the 3 DECIG – Global Indicators Briefs No. 2 Figure 3 Employment Changes in Female- and Male-owned Firms since the Onset of the COVID-19 Crisis Across several metrics, workers in female-owned rms fared worse than their counterparts in rms that are owned by men. 60 50.5 50 46.1 Percent of firms 38.8 40 35.7 30 25.0 20 16.3 10 0 Decreased total hours Decreased total number of Reduced workers' salaries worked per week permanent workers since or benefits due to the compared to one year ago Dec 2019 COVID-19 crisis Majority female owned Majority male owned Source: World Bank Enterprise Survey (WBES) Follow-up Surveys on COVID-19. Note: The figure covers the latest survey round for 40 countries in the sample. rm of their own volition: relative to male-owned rms, than their male-owned counterparts, which is likely linked fewer workers in female-owned rms have taken leave or to their concentration in certain sectors. Statistics from have quit since the crisis began. the baseline WBES for the same group of countries show that, in rms that are female-owned, 56 percent of Further evidence that employees have fared worse in permanent, full-time workers are female; this compares to female-owned rms is provided by looking at the 32 percent of the workforce in male-owned rms. Given incidence of decreases in the rms’ operating hours since the higher representation of female workers in the onset of the crisis. As gure 3 illustrates, 50.5 percent female-owned rms, it is possible that female workers of female-owned rms have reduced their weekly make up a disproportionate share of those workers who operating hours: 4.4 percentage points higher than the have lost their jobs or experienced a reduction in salaries proportion of male-owned rms that reported the same. and bene ts; however, this hypothesis would require is is likely to have an impact on the take-home pay of further research to verify. those workers who receive an hourly wage. As such, it is unsurprising to see that female-owned rms are Female-owned Firms Are More Likely to signi cantly more likely to have reduced the salaries and Struggle Financially, but as Likely as bene ts of their workers since the crisis began: 25 percent Male-owned Firms to Receive Government of rms owned by women have had to cut salaries and Support bene ts due to the crisis, while only 16.3 percent of male-owned rms report having had to do so. Overall, Female-owned rms display multiple signs of 19.6 percent of workers in female-owned rms have seen deeper nancial distress than their male-owned their salaries and bene ts reduced, compared to 13.1 counterparts. On average, 78.9 percent of female-owned percent of workers in male-owned rms. rms experienced a decrease in liquidity or cash ow availability since the onset of the pandemic, which is 3.5 Taken together, the data paint a bleak picture of the percentage points higher than for male-owned rms. crisis’ impact on workers in female-owned rms: Furthermore, a higher share of female-owned rms was permanent workers are more likely to have lost their jobs; forced to delay payments to their suppliers, landlords, or these rms are more likely to have reduced their operating tax authorities (57.0 percent vs. 50.6 percent for hours; and their employees are more likely to have male-owned rms). Importantly, these gender gaps appear experienced a reduction in their salaries and bene ts. to be most pronounced in lower-income countries, small or medium enterprises (SMEs), and sectors other than While the focus of this brief is the gendered impacts of retail. the crisis on female entrepreneurs, the fact that workers have fared worse in rms owned by women may have e gender gaps in experiencing nancial distress are knock-on e ects on female workers. Precrisis data show also visible through choices made by the entrepreneurs. that female-owned rms employ more female workers Female-owned rms were more likely to have applied for 4 DECIG – Global Indicators Briefs No. 2 Figure 4 Firms’ Access to Finance during the COVID-19 Pandemic Firms that were majority female-owned before the pandemic have experienced more nancial distress than male-owned rms 90 78.9 80 75.3 70 57.0 Percent of firms 60 50.6 50.7 50 42.8 40 30.5 30 25.0 20.6 20 13.9 10 0 Decrease in liquidity or Delay payments to Applied for a loan Loans not needed as Recent loan application cash flow availability suppliers, landlords, or main reason for not was rejected tax authorities applying Majority female owned Majority male owned Source: World Bank Enterprise Survey (WBES) Follow-up Surveys on COVID-19. Note: The figure covers 40 countries for the first three indicators, and 30 countries (more recent surveys) for the last three. All indicators in the figure refer to the period since the onset of the pandemic. a loan since the pandemic began than male-owned rms considerable di erence is only slightly reduced when (25 percent vs. 20.6 percent). Among the rms that did rms’ sector and other standard features are taken into not apply, a considerably lower share of rms noted “no account, and is present across all income-groups, all rm need” as the main reason, suggesting that among the sizes except large (100+ employees), and all sectors. For female-owned rms that did not apply for the loan, many example, among high-income countries, the rates at more do need the loan than male-owned rms. e most which loans were rejected are 29.2 percent vs. 13.7 staggering di erence is in the rates at which loan percent for female- and male-owned rms, respectively, applications were rejected: female-owned rms were more and the same indicator for the other services sector is than twice as likely to have their application rejected than nearly three times higher for female-owned rms (34.4 male-owned rms (30.5 percent vs. 13.9 percent). is percent vs. 12.4 percent). Figure 5 Government Support to Female- and Male-owned Firms during the COVID-19 Pandemic Female- and male-owned rms were equally likely to receive overall government support, with some di erences within the types of this support 45 40.6 39.8 40 35 31.3 29.9 Percent of firms 30 25 20 15.5 15 13.6 12.9 11.8 11.6 10.8 10 8.0 6.8 5 0 Received/expect Cash transfers Deferral of Access to new Fiscal relief Wage subsidies govt support payments credit Majority female owned Majority male owned Source: World Bank Enterprise Survey (WBES) Follow-up Surveys on COVID-19. Note: The figure covers the latest round of survey for 40 countries. 5 DECIG – Global Indicators Briefs No. 2 Around 40 percent of rms, both female- and compared to men, along multiple dimensions (de Paz, male-owned, received or expect to receive some form of Gaddis, and Muller 2021). is brief adds evidence by government support to cope with the pandemic. pointing out similar patterns for female entrepreneurs. However, when looking at the type of support Firms with majority female ownership faced received, female-owned rms are slightly more likely disproportional hardships, from more widespread and to receive or expect cash transfers or deferral of longer temporary closures to di cult decisions regarding payments. e overall government support is only reductions in workforce. Although it is hard to nd slightly tilted toward female-owned rms (by 3.6 encouraging signs, female-owned rms have managed to percentage points) when rms’ size, age, sector, location, power through and performed similarly to the and the timing of the surveys are taken into account. male-owned rms in terms of overall survival of their Interestingly, among retail rms, or among medium-sized businesses, and general adjustments to their business or larger rms (20+ employees), a lower share of operations to meet the crisis. Moreover, female female-owned rms than male-owned rms received or entrepreneurs share a similar outlook with their male expect government support, with the opposite pattern counterparts. While a higher share of female- than among smaller or nonretail rms. Among the rms that male-owned rms anticipate falling in arrears on did receive or expect government support, female-owned outstanding liabilities in the six months following the rms had access to slightly more types of support. In interview (35.7 percent vs. 29.2 percent), similar shares particular, among the ve types reported in gure 5, report optimism in returning to normal levels of sales or female-owned rms received or expect on average 2.0 workforce in the near future (96 percent). Assessments of types compared with 1.8 for male-owned rms. how long on average it will take to return to those normal levels are also similar across rms owned by women and Female Entrepreneurs and their Male men (around 7.5 months). 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