The Impact of a Principles-Based Approach to Director Gender Diversity Policy

61 Pages Posted: 27 Aug 2021 Last revised: 15 Nov 2021

See all articles by Tor-Erik Bakke

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Hamed Mahmudi

University of Delaware - Department of Finance

Aazam Virani

University of Arizona - Department of Finance

Date Written: August 23, 2021

Abstract

We study the impact of a principles-based (i.e., comply or explain) approach to female representation on corporate boards. In contrast to the existing evidence on mandatory diversity regulation, we find that those firms most likely to be affected by this principles-based regulation exhibit positive abnormal returns around its announcement. Moreover, relative to control firms, they exhibit a 30% increase in the fraction of female directors over the longer term. We find that compliance with the gender diversity policy increases over time and that the main determinants of non-compliance are economic frictions related to the supply of qualified female directors.

Keywords: Director Gender Diversity, Comply or Explain Governance, Boards of Directors, Regulation 

JEL Classification: G34, G38, G14, K22, J21

Suggested Citation

Bakke, Tor-Erik and Field, Laura Casares and Mahmudi, Hamed and Virani, Aazam, The Impact of a Principles-Based Approach to Director Gender Diversity Policy (August 23, 2021). Available at SSRN: https://ssrn.com/abstract=3910116 or http://dx.doi.org/10.2139/ssrn.3910116

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
6087707753 (Phone)

HOME PAGE: http://https://sites.google.com/site/tebakke/

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Hamed Mahmudi (Contact Author)

University of Delaware - Department of Finance ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Aazam Virani

University of Arizona - Department of Finance ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

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