Abstract

http://ssrn.com/abstract=1364470
 
 

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


Kenneth R. Ahern


University of Southern California - Marshall School of Business

Amy K. Dittmar


University of Michigan at Ann Arbor - The Stephen M. Ross School of Business

May 20, 2011

Quarterly Journal of Economics, 2012, vol. 127(1): 137-197.

Abstract:     
In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota 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, consistent with less capable boards.

Number of Pages in PDF File: 66

Keywords: Board of directors, Natural experiment, Tobin's Q, Gender

JEL Classification: G34, G38, J48, J20

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Date posted: March 21, 2009 ; Last revised: June 16, 2012

Suggested Citation

Ahern, Kenneth R. and Dittmar, Amy K., The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation (May 20, 2011). Quarterly Journal of Economics, 2012, vol. 127(1): 137-197.. Available at SSRN: http://ssrn.com/abstract=1364470 or http://dx.doi.org/10.2139/ssrn.1364470

Contact Information

Kenneth Robinson Ahern
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~kahern/
Amy Dittmar (Contact Author)
University of Michigan at Ann Arbor - The Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-3108 (Phone)
HOME PAGE: http://webuser.bus.umich.edu/adittmar/
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