The Impact of a Principles-Based Approach to Director Gender Diversity
64 Pages Posted: 27 Aug 2021 Last revised: 22 Dec 2022
Date Written: August 23, 2021
We study the impact of a principles-based regulatory approach to female representation on boards, requiring firms to disclose gender diversity policies or lack thereof. Although adding females to boards is not mandatory, firms subject to the regulation increase their fraction of female directors by 38% relative to control groups. Firms most likely to be impacted by the regulation exhibit positive abnormal announcement returns. Post-regulation, firms are increasingly likely to adopt female director target ratios and disclose that they consider gender diversity in board nominations. Firms with less access to female directors are most likely to explain their lack of diversity.
Keywords: Director Gender Diversity, Comply or Explain Governance, Boards of Directors, Regulation, Disclosure
JEL Classification: G34, G38, G14, K22, J21
Suggested Citation: Suggested Citation