Gender Diversity in Corporate Boards: Evidence from Quota-Implied Discontinuities

Abstract

We investigate the effects of women directors on firm value and operations, using data across seven European countries that introduced mandatory or voluntary regulation on female representation in corporate boards. We exploit quasi-random assignment induced by rounding, whenever percentage-based regulation applies to a small group. We find that having more women on board causally increases Tobin's Q and buy-and-hold returns. We further demonstrate that these positive effects are not explained by increased risk-taking or changes in board characteristics, but rather by reductions in empire-building activity. Our results highlight that gender quotas are not necessarily a costly way of promoting equality.

Keywords: Gender diversity, gender quota, board of directors, firm performance

JEL Classification: J16, J48, G34, G38, C18