Investors’ Response to the #MeToo Movement: Does Corporate Culture Matter?

58 Pages Posted: 14 Oct 2019 Last revised: 16 Feb 2022

See all articles by Mary Brooke Billings

Mary Brooke Billings

New York University

April Klein

New York University (NYU) - Department of Accounting

Yanting (Crystal) Shi

New York University (NYU), Leonard N. Stern School of Business, Department of Accounting, Students

Date Written: May 23, 2019

Abstract

This paper provides evidence that the #MeToo movement revised investors’ beliefs about the costs (benefits) of fostering an exclusive (inclusive) culture, as reflected by the absence (presence of a critical mass) of women directors in the board room. Tracking the timeline of events associated with the #MeToo movement, beginning with the Harvey Weinstein exposé in October of 2017 in The New York Times, we document contrasting market reactions to the movement depending on the existing culture of the firm. While firms that historically have excluded women from their board experienced a negative market response as momentum for the cause increased, firms that historically embraced the inclusion of women on their board enjoyed positive returns as #MeToo events unfolded. In contrast, examining randomly generated pseudo-events occurring during the same time frame, we do not detect differences in the market’s response to these pseudo-events when comparing firms with exclusive and inclusive cultures. In the context of increased regulator attention to board gender diversity as well as the ESG activist campaigns by large institutional investors, our study documents a shift in investors’ beliefs about the risks associated with future revelations of sexual misconduct and also about the value of having women in the board room shaping the culture of the firm.

Keywords: Board of directors; gender; diversity; corporate culture; ESG

JEL Classification: M14, G34

Suggested Citation

Billings, Mary Brooke and Klein, April and Shi, Yanting, Investors’ Response to the #MeToo Movement: Does Corporate Culture Matter? (May 23, 2019). NYU Stern School of Business, European Corporate Governance Institute – Finance Working Paper No. 764/2021, Available at SSRN: https://ssrn.com/abstract=3466326 or http://dx.doi.org/10.2139/ssrn.3466326

Mary Brooke Billings

New York University ( email )

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Suite 9-160
New York, NY NY 10012
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(212) 998-0097 (Phone)

April Klein (Contact Author)

New York University (NYU) - Department of Accounting ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012
United States

Yanting Shi

New York University (NYU), Leonard N. Stern School of Business, Department of Accounting, Students ( email )

40 West 4th Street
Suite 10-98
New York, NY 10012
United States

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