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The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation

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  • Kenneth R. Ahern
  • Amy K. Dittmar

Abstract

In 2003, a new law required that 40% of Norwegian firms' directors be women--at the time only 9% of directors were women. We use the prequota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin's Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/qje/qjr049
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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 1 ()
Pages: 137-197

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:1:p:137-197

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Cited by:
  1. Roberto E. Wessels & Tom J. Wansbeek, 2014. "What is the Relation (if any) Between a Firm's Corporate Governance Arrangements and its Financial Performance?," CESifo Working Paper Series 4599, CESifo Group Munich.
  2. Stefan Bauernschuster & Anita Fichtl, 2013. "Brauchen wir eine gesetzliche Frauenquote?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 66(02), pages 39-48, 01.
  3. Geiler, P.H.M., 2012. "Essays on executive remuneration contracting: Managerial power, corporate payout, and gender discrimination," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590842, Tilburg University.
  4. Balsmeier, Benjamin & Bermig, Andreas & Dilger, Alexander, 2013. "Corporate governance and employee power in the boardroom: An applied game theoretic analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 51-74.
  5. Sylvie Blasco & Barbara Pertold-Gebicka, 2012. "Employment Policies, Hiring Practices and Firm Performance," Working Papers 2012-27, Centre de Recherche en Economie et Statistique.
  6. repec:ipg:wpaper:201413 is not listed on IDEAS
  7. Daunfeldt, Sven-Olov & Rudholm, Niklas, 2012. "Does Gender Diversity in the Boardroom Improve Firm Performance?," HUI Working Papers 60, HUI Research.
  8. repec:dgr:uvatin:2011074 is not listed on IDEAS
  9. Jingwen Ge, 2013. "Gender issues of financial analysts," Post-Print dumas-00934606, HAL.
  10. Schwartz-Ziv, Miriam & Weisbach, Michael S., 2013. "What do boards really do? Evidence from minutes of board meetings☆☆Miriam Schwartz-Ziv is from Harvard University and Northeastern University, e-mail: miriam.schwartz@mail.huji.ac.il. Michael S. W," Journal of Financial Economics, Elsevier, vol. 108(2), pages 349-366.
  11. Miriam Schwartz-Ziv & Michael Weisbach, 2011. "What do Boards Really Do? Evidence from Minutes of Board Meetings," NBER Working Papers 17509, National Bureau of Economic Research, Inc.
  12. Renée B. Adams & Tom Kirchmaier, . "From Female Labor Force Participation to Boardroom Gender Diversity," FMG Discussion Papers dp715, Financial Markets Group.
  13. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2013. "Research, innovation and technological performance in Germany - EFI Report 2013," Research, innovation and technological performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI), volume 127, number 2013e.
  14. Min, Byung-Seong, 2013. "Evaluation of board reforms: An examination of the appointment of outside directors," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 21-43.

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