Cracks in the Boards: the Opportunity Cost of Governance Homogeneity

37 Pages Posted: 14 May 2021

See all articles by Helene Maghin

Helene Maghin

KU Leuven - Department of Economics; SciencesPo - LIEPP - Laboratory for Interdisciplinary Evaluation of Public Policies; Université Paris VI Pierre et Marie Curie - College de France

Date Written: May 13, 2021

Abstract

Does the composition of governance affect firm outcomes? We exploit the timings and thresholds of a gender quota in boards of directors and supervisory boards to causally determine the impact of a change in leadership on performance. Using a novel design and data on boards, we find that firms forced to comply with the 2011 gender quota in France increased their profit margin by 5.4 percent relative to firms with unchanged boards thereby limiting diminishing profitability. We identify a shift in their cost structure away from excessive purchasing of services such as out-sourcing and sub-contracting. The decision to only marginally increase this expenditure is more optimal as their revenue grows. We show that our effects are nearly entirely explained by the first newcomer in the board. The persistence of our estimates provide evidence for its role in updating knowledge and suggest the relevance of governance heterogeneity for performance.

Keywords: Governance, Firm performance, Industrial organisation

JEL Classification: L1, L2, M1

Suggested Citation

Maghin, Helene, Cracks in the Boards: the Opportunity Cost of Governance Homogeneity (May 13, 2021). Available at SSRN: https://ssrn.com/abstract=3845675 or http://dx.doi.org/10.2139/ssrn.3845675

Helene Maghin (Contact Author)

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

SciencesPo - LIEPP - Laboratory for Interdisciplinary Evaluation of Public Policies ( email )

27, rue Saint-Guillaume
Paris
France

Université Paris VI Pierre et Marie Curie - College de France ( email )

11 Place Marcellin Berthelot
Paris, 75005
France

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