Cracks in the Boards: The Opportunity Cost of Homogeneous Boards of Directors
34 Pages Posted: 26 Jul 2019
Date Written: July 24, 2019
Boards of directors' composition is closely related to firm inputs, output and financial returns. This paper uses the announcement and implementation of quotas in France as a quasi-experiment to test the effect of a shock on their composition. It moves beyond previous studies by establishing a clear causal link between governance change and firm total factor productivity (TFP) growth. It further contributes to the literature by disentangling between adjustment costs and benefits from new board members. The initial decline followed by a rise of the growth rate of TFP above pre-quota levels points to the positive impact of constrained change. It reflects the opportunity cost of homogeneous boards of directors for firms and the economy at large.
Keywords: gender, productivity
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