As California Goes, So Goes the Nation? Board Gender Quotas and the Legislation of Non-Economic Values

66 Pages Posted: 3 Jan 2019 Last revised: 16 Jan 2020

See all articles by Felix von Meyerinck

Felix von Meyerinck

University of St. Gallen - School of Finance

Alexandra Niessen-Ruenzi

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

Steven Davidoff Solomon

University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy; European Corporate Governance Institute

Date Written: January 15, 2020

Abstract

In 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in the state. We document negative announcement returns to the adoption of the quota for Californian firms, but also large negative spillover effects on a matched group of non-Californian firms, particularly those located in states that followed California’s legislative lead in the past by raising minimum wages or legalizing cannabis. Frictions on the director labor market only explain a small fraction of value losses of Californian firms. They do not explain the negative spillover effects on firms in other states. We propose shareholders’ fear of further legislation of non-economic values as a new explanation for the negative announcement returns to gender quotas. In line with this view, we find that firms with higher policy sensitivity show the strongest reaction.

Keywords: Gender quota, Regulation, Economic policy uncertainty, Stakeholder perspective

JEL Classification: J16, J78, G38, K38

Suggested Citation

von Meyerinck, Felix and Niessen-Ruenzi, Alexandra and Schmid, Markus and Davidoff Solomon, Steven, As California Goes, So Goes the Nation? Board Gender Quotas and the Legislation of Non-Economic Values (January 15, 2020). Available at SSRN: https://ssrn.com/abstract=3303798 or http://dx.doi.org/10.2139/ssrn.3303798

Felix Von Meyerinck

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

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

Markus Schmid (Contact Author)

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

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

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

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Steven Davidoff Solomon

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

215 Boalt Hall
Berkeley, CA 94720-7200
United States

University of California, Berkeley - Berkeley Center for Law, Business and the Economy ( email )

Berkeley, CA 94720-7200

European Corporate Governance Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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