Does Mandatory Gender Balance Work? Changing Organizational Form to Avoid Board Upheaval

37 Pages Posted: 30 Apr 2013  

Øyvind Bøhren

BI Norwegian Business School - Department of Finance

Siv Staubo

BI Norwegian Business School

Date Written: March 20, 2013

Abstract

Norway is the first, and so far only, country to mandate a minimum fraction of female and male directors on corporate boards. We find that after a new gender balance law surprisingly stipulated that the firm must be liquidated unless at least 40% of its directors are of each gender, half the firms exit to an organizational form not exposed to the law. This response suggests that forced gender balance is costly. These costs are also firm-specific, because exit is more common when the firm is non-listed, successful, small, young, has powerful owners, no dominating family owner, and few female directors. These characteristics reflect high costs of involuntary board restructuring and low costs of abandoning the exposed organizational form. Correspondingly, certain unexposed firms hesitate to become exposed. Overall, we find that mandatory gender balance may produce firms with either inefficient organizational forms or inefficient boards.

Keywords: Corporate governance, Organizational form, Regulation, Boards, Gender quota

JEL Classification: G30, G38

Suggested Citation

Bøhren, Øyvind and Staubo, Siv, Does Mandatory Gender Balance Work? Changing Organizational Form to Avoid Board Upheaval (March 20, 2013). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2257769

Øyvind Bøhren (Contact Author)

BI Norwegian Business School - Department of Finance ( email )

N-0442 Oslo
Norway

Siv Staubo

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Paper statistics

Downloads
188
Rank
132,245
Abstract Views
1,313