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Does gender-balancing the board reduce firm value?

Karin Thorburn, Bjorn Eckbo and Knut Nygaard

No 11176, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A board gender quota reduces firm value if it forces the appointment of under-qualified female directors. We examine this costly constraint hypothesis using the natural experiment created by Norway's 2005 board gender-quota law. This law drove the average fraction of female directors from 5% in 2001 to 40% by 2008, producing a large exogenous shock to director experience and independence. However, statistically robust analyses of quota-induced shareholder announcement returns, and of long-run stock and accounting performance, fail to reject the hypothesis of a zero valuation effect of this shock to board composition. Moreover, firms did not expand board size, nor is there significant evidence of quota-induced corporate conversions to a (non-public) legal form exempted from the quota law. Finally, our evidence on female director turnover and a novel network-based measure of director gender-power gap also fails to suggest that qualified female directors were in short supply.

Keywords: Gender quota; Director independence; Valuation effect; Corporate conversion; Busy directors; Director network power; Long-run performance (search for similar items in EconPapers)
JEL-codes: G34 G35 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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