Valuation effects of Norway's board gender-quota law revisited

47 Pages Posted: 14 Mar 2016 Last revised: 28 Aug 2020

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Knut Nygaard

Oslo Business School at Oslo Metropolitan University

Karin S. Thorburn

Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: August 19, 2020

Abstract

We critically revisit and expand previous studies on the likely valuation effect of Norway’s pioneering board gender-quota law. Most important, Ahern and Dittmar (2012) report a significantly negative average abnormal stock return, which they conclude is evidence of a large shareholder-borne cost of the quota constraint. We first show that they allocate their negative market reaction to the wrong event, which reverses their inference. We then show that their abnormal return estimate becomes statistically insignificant once we make the necessary adjustment for contemporaneous cross-correlation of stock returns. Furthermore, we provide new evidence on long-run abnormal stock returns, changes in Tobin’s Q and operating profitability, and legal conversions, all of which corroborate that Norway’s quota law most likely caused a statistically insignificant valuation effect on regulated firms. Overall, our evidence suggests that the pool of qualified female directors was sufficiently deep to avoid significant shareholder-borne costs of the quota.

Keywords: Gender quota, director independence, valuation effect, long-run performance, corporate conversion, busy directors, director network power

JEL Classification: G38

Suggested Citation

Eckbo, B. Espen and Nygaard, Knut and Thorburn, Karin S., Valuation effects of Norway's board gender-quota law revisited (August 19, 2020). Tuck School of Business Working Paper No. 2746786, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 463/2016, Available at SSRN: https://ssrn.com/abstract=2746786 or http://dx.doi.org/10.2139/ssrn.2746786

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)

HOME PAGE: http://www.tuck.dartmouth.edu/eckbo

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Knut Nygaard

Oslo Business School at Oslo Metropolitan University ( email )

Pilestredet 35
Oslo, 0167
Norway

Karin S. Thorburn

Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway
+4755959283 (Phone)

HOME PAGE: http://www.nhh.no/cv/thorburn

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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