Women on Board: Gender Balance Initiatives and Their Impact on Board Structure and Firm Performance

Abstract

This paper is the first to provide a comprehensive analysis of how different gender balance initiatives in Europe have impacted firms' board structure. Our sample covers 18 countries over the period 2005-2018. We propose a novel indicator of the strictness of the country's gender balance initiative (GBI) by taking into account the nature of the quota, mandatory or advisory, the ratio of women on board required, and the type of sanctions imposed on non-compliant firms. We use a diff-in-diff approach to investigate the resulting impact on several characteristics of the board as well as the firm's performance. Our results document that stricter GBI leads to a larger increase in the percentage of Women on Boards (WoB). In contrast, we do not find evidence that stricter GBI deteriorates the board effectiveness. On the contrary, some desirable features of a corporate board, such as busyness, qualifications and independence, improve with stricter regulations. Our findings also show that stricter GBI has somewhat enhanced the likelihood of appointing chairwomen and female CEOs. Finally, we do not find any evidence of a detrimental impact of quota regulation on a firm's performance. Our results remain robust to a battery of robustness tests. Overall, our findings provide support to the introduction of mandatory gender balance initiatives.

Keywords: gender quotas, corporate boards, board effectiveness, performance

JEL Classification: G34, G18