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As California goes, so goes the nation? Board gender quotas and the legislation of non-economic values

Felix von Meyerinck (), Alexandra Niessen-Ruenzi, Markus Schmid and Steven Davidoff Solomon

No 1904, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: In 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in the state. We document negative announcement returns to the adoption of the quota for Californian firms, but also large negative spillover effects on a matched group of non-Californian firms, particularly those located in states that followed California’s legislative lead in the past by raising minimum wages or legalizing cannabis. Frictions on the director labor market only explain a small fraction of value losses of Californian firms. They do not explain the negative spillover effects on firms in other states. We propose shareholders’ fear of further legislation of non-economic values as a new explanation for the negative announcement returns to gender quotas. In line with this view, we find that firms with higher policy sensitivity show the strongest reaction.

Keywords: Board Gender Quota; Firm Value; Director Labor Market (search for similar items in EconPapers)
JEL-codes: J16 J78 K38 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2019-02, Revised 2019-12
New Economics Papers: this item is included in nep-gen
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