Female Directors and Firm Value: New Evidence from Directors' Deaths

AFA 2016 San Francisco Meetings Paper

59 Pages Posted: 25 Oct 2013 Last revised: 22 Nov 2021

See all articles by Thomas Schmid

Thomas Schmid

The University of Hong Kong - Faculty of Business and Economics

Daniel Urban

Erasmus University Rotterdam (EUR) - Department of Business Economics; Erasmus Research Institute of Management (ERIM)

Date Written: November 19, 2021

Abstract

This paper examines how female directors (FDs) affect firm value in the absence of mandatory gender quotas. Using a newly collected data set on director deaths around the globe, we find that stock prices decrease approximately 2% more when an FD passes away, compared to men. What explains this negative capital market reaction? We find evidence that finding successors for deceased FDs is challenging for firms: succession delays are longer, and although firms try to replace FDs with women, two-thirds of their successors are male. Furthermore, their successors tend to be younger, less experienced, and more often externally hired. Stock prices decline less if more potential female successors exist in a country, the firm is larger, or FDs other than the deceased woman were on the board. Since observable characteristics such as age, tenure, education, and network centrality cannot explain the negative stock market reaction, unobserved differences across genders that lead to a lower fit of male successors to the existing board are the most likely explanation for the firm value loss after the death of an FD.

Keywords: female directors, director death, firm value, board of directors

JEL Classification: G32, G34

Suggested Citation

Schmid, Thomas and Urban, Daniel, Female Directors and Firm Value: New Evidence from Directors' Deaths (November 19, 2021). AFA 2016 San Francisco Meetings Paper, Available at SSRN: https://ssrn.com/abstract=2344786 or http://dx.doi.org/10.2139/ssrn.2344786

Thomas Schmid

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Daniel Urban (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Business Economics ( email )

Netherlands

HOME PAGE: http://sites.google.com/view/danielurban/home

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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