As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions

84 Pages Posted: 3 Jan 2019 Last revised: 7 Dec 2022

See all articles by Felix von Meyerinck

Felix von Meyerinck

University of Zurich - Department of Banking and Finance

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance; University of Mannheim - Department of Finance

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Steven Davidoff Solomon

University of California, Berkeley - School of Law; European Corporate Governance Institute (ECGI)

Date Written: December 6, 2022

Abstract

In 2018, California became the first U.S. state to adopt a mandatory board gender quota for all firms
headquartered in the state. In 2022, it became the first U.S. state to invalidate a board gender quota. We document large negative abnormal returns to the adoption of the gender quota for California firms and large spillover effects to non-California firms. We show that director labor market frictions are not the main driver of these effects and propose a novel explanation: Shareholders’ distaste of stakeholder-friendly government interventions. Consistently, we find that more stakeholder-friendly firms, measured by their ESG scores or presence of SRI funds among their shareholder base, react more positively to the California gender quota. We also find that California and non-California firms with higher sensitivity to regulatory uncertainty react more negatively to the quota’s adoption, and more positively to its invalidation. For non-California firms, the effects are concentrated among firms in states that are likely to follow California’s legislative lead.

Keywords: Gender quota, Regulatory uncertainty, Director labor market

JEL Classification: J16, J24, G38, K38

Suggested Citation

von Meyerinck, Felix and Niessen-Ruenzi, Alexandra and Niessen-Ruenzi, Alexandra and Schmid, Markus and Davidoff Solomon, Steven, As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions (December 6, 2022). European Corporate Governance Institute – Finance Working Paper No. 785/2021, Available at SSRN: https://ssrn.com/abstract=3303798 or http://dx.doi.org/10.2139/ssrn.3303798

Felix Von Meyerinck

University of Zurich - Department of Banking and Finance ( email )

Plattenstr 32
Zurich, 8032
Switzerland

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

University of Mannheim, Department of Finance ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181 1595 (Phone)

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Swiss Finance Institute

c/o University of St. Gallen
Dufourstrassse 50
St. Gallen, SG 9000
Switzerland

European Corporate Governance Institute (ECGI) ( email )

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

Steven Davidoff Solomon

University of California, Berkeley - School of Law ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

European Corporate Governance Institute (ECGI) ( email )

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

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