Valuation effects of Norway's board gender-quota law revisited
47 Pages Posted: 14 Mar 2016 Last revised: 28 Aug 2020
Date Written: August 19, 2020
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: Suggested Citation