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Does gender-balancing the board reduce firm value?

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  • Eckbo, B Espen
  • Nygaard, Knut
  • Thorburn, Karin S

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.

Suggested Citation

  • Eckbo, B Espen & Nygaard, Knut & Thorburn, Karin S, 2016. "Does gender-balancing the board reduce firm value?," CEPR Discussion Papers 11176, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11176
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    Cited by:

    1. Garanina, Tatiana & Muravyev, Alexander, 2019. "The Gender Composition of Corporate Boards and Firm Performance: Evidence from Russia," IZA Discussion Papers 12357, Institute of Labor Economics (IZA).
    2. Meier, Kristina & Niessen-Ruenzi, Alexandra & Ruenzi, Stefan, 2018. "The impact of role models on women's self-selection in competitive environments," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181589, Verein für Socialpolitik / German Economic Association.
    3. Ferreira, Daniel & Ginglinger, Edith & Laguna, Marie-Aude & Skalli, Yasmine, 2017. "Board Quotas and Director-Firm Matching," CEPR Discussion Papers 12117, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    ; ong-run performance; busy directors; corporate conversion; director independence; director network power; Gender quota; valuation effect;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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