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On the side effects of mandatory gender diversity laws in corporate boards

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  • Marisetty, Vijaya Bhaskar
  • Prasad, Salu

Abstract

Regulators around the world are pushing for a higher representation of females on corporate boards. While this move reduces the representation-based gender gap (RGP), less is known how this may affect the compensation-based gender gap (CGP). Using 56,976 director-year observations around the mandatory gender quota law imposed in the Indian market, we find that a significant reduction of RGP in the post-gender quota law period comes at the cost of a substantial increase in CGP. Our compensation decomposition analyses indicate that CGP in the corporate directors' labour market is driven by disproportionately higher salaries and commissions paid to male directors. Overall, our results suggest a more holistic approach to address the gender gap in corporate boards.

Suggested Citation

  • Marisetty, Vijaya Bhaskar & Prasad, Salu, 2022. "On the side effects of mandatory gender diversity laws in corporate boards," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000361
    DOI: 10.1016/j.pacfin.2022.101741
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    More about this item

    Keywords

    Blinder-Oaxaca decomposition; Corporate governance; Executive compensation; Gender discrimination; Gender quota; Wage discrimination;
    All these keywords.

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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