Delegated Gender Diversity

60 Pages Posted: 7 Feb 2022

See all articles by Hao Liang

Hao Liang

Singapore Management University - Lee Kong Chian School of Business; European Corporate Governance Institute (ECGI)

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance

Date Written: January 25, 2022

Abstract

We revisit the value implications of female representation on boards by exploiting the board diversity campaign announcement by Norges Bank Investment Management (NBIM)—the world’s largest sovereign wealth fund. In February 2021, NBIM required its portfolio firms to have at least 30% female directors. Using NBIM’s announcement as a shock to investor expectations about female board representation, we document significantly positive returns for firms with a female director shortfall, concentrated in firms with low institutional ownership. Consistent with an investor demand view of board gender diversity, we find that these firms experienced a greater increase in ownership by socially responsible institutional investors and a greater decrease in their implied cost of capital following the announcement. Our results indicate that the documented positive valuation effects of gender diversity can be explained by a discount rate channel.

Keywords: board gender diversity, institutional investors, investor demand, sustainable investing

JEL Classification: G3, G23, M14

Suggested Citation

Liang, Hao and Vansteenkiste, Cara, Delegated Gender Diversity (January 25, 2022). European Corporate Governance Institute – Finance Working Paper No. 814/2022, Available at SSRN: https://ssrn.com/abstract=4023775 or http://dx.doi.org/10.2139/ssrn.4023775

Hao Liang (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Cara Vansteenkiste

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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