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Gender bias, board diversity, and firm value: Evidence from a natural experiment

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  • Lawrence, Edward R.
  • Raithatha, Mehul

Abstract

We study the impact of gender diversity in corporate boards on firm value by exploiting a natural experiment setting in India where the government mandated firms to appoint at least one female director on their boards. We find a significantly positive market reaction when firms comply with the mandate but only when they appoint qualified female directors who are not related to promoters. Moreover, market reward is higher for firms headquartered in states with severe gender bias. We show how regulatory intervention mitigates frictions related to gender bias to improve firm value through greater gender diversity when firms respond appropriately.

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  • Lawrence, Edward R. & Raithatha, Mehul, 2023. "Gender bias, board diversity, and firm value: Evidence from a natural experiment," Journal of Corporate Finance, Elsevier, vol. 78(C).
  • Handle: RePEc:eee:corfin:v:78:y:2023:i:c:s0929119922001924
    DOI: 10.1016/j.jcorpfin.2022.102349
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    More about this item

    Keywords

    Board of directors; Female directors; Gender diversity; Window dressing; Gender bias; Gender quotas;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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