Mandatory Gender Balance and Board Independence
European Financial Management 22, 2016, 3-30.
40 Pages Posted: 30 Dec 2014 Last revised: 12 Aug 2017
Date Written: December 10, 2014
We find that forcing radical gender balance on corporate boards is associated with increased board independence and reduced firm value. A mandatory 40-percent gender quota shifts the average fraction of independent directors from 46 to 67 percent because female directors are much more often independent directors than males are. This shock to board independence via gender quotas is strongest in small, young, profitable, non-listed firms with powerful stockholders and few female directors. Such firms also lose the most value, presumably because they need advice from dependent directors the most and monitoring by independent directors the least.
Keywords: corporate governance, regulation, board independence, female directors, gender quota
JEL Classification: G30, G38
Suggested Citation: Suggested Citation