As California Goes, So Goes the Nation? The Impact of Board Gender Quotas on Firm Performance and the Director Labor Market

78 Pages Posted: 3 Jan 2019 Last revised: 25 Feb 2019

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: February 22, 2019

Abstract

On September 30, 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in California. We find that the introduction of the quota is associated with significantly negative announcement returns for these firms. Consistent with the quota imposing frictions, the effect is larger for firms requiring more female directors to comply with the quota and for firms with poor corporate governance. We also document negative spillover effects to non-Californian firms. They are larger for firms operating in industries in which Californian firms lack more female directors, suggesting that valuable female directors may migrate from non-Californian to Californian firms. We also document negative spillover effects for firms headquartered in states that are more likely to follow California’s lead. These are firms headquartered in states dominated by the Democratic Party and states which followed California’s lead in legalizing cannabis consumption and raising minimum wages exceeding the federal rate. Finally, we show that, already as of month-end December 2018, female representation on the boards of Californian firms increased. Newly appointed female directors are younger, less experienced, and less independent than incumbent and leaving directors.

Keywords: Board Gender Quota, Firm Value, Director Labor Market

JEL Classification: J16, J78, K38

Suggested Citation

von Meyerinck, Felix and Niessen-Ruenzi, Alexandra and Schmid, Markus and Davidoff Solomon, Steven, As California Goes, So Goes the Nation? The Impact of Board Gender Quotas on Firm Performance and the Director Labor Market (February 22, 2019). 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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