Does Mandatory Board Gender-Balancing Reduce Firm Value?

41 Pages Posted: 24 Feb 2022 Last revised: 2 Mar 2022

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Knut Nygaard

Oslo Business School at Oslo Metropolitan University

Karin S. Thorburn

Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: February 20, 2022

Abstract

Mandated board gender-balancing is a social-policy instrument, which in principle is unrelated to concerns about firms' economic performance. Nonetheless, imposing such a policy may have unintended consequences (positive or negative) for firm value, which is important for all of the firm's constituencies - not only shareholders. In this paper, we highlight and extend our recent research on the economic effects of Norway's pioneering gender-quota law, which forced board gender balancing of all domestic public limited corporations by early 2008. This research subsumes and econometrically corrects controversial conclusions of extant studies. Most important, our research shows that quota-induced changes in market valuations and operating performance were both economically and statistically negligible. Furthermore, we show that corporate conversions to a legal form that prevents the firm from raising public equity capital---but does not require gender-balancing - were unrelated to the company's pre-quota female director shortfall. We also present new evidence that boards managed to preserve directors' large-firm CEO experience, without increasing director busyness. We conclude that the supply of qualified female director candidates was sufficiently large to avoid board concentration and negative economic effects of the quota restriction.

Keywords: Gender quota; board diversity; valuation effect; return correlation; long-run performance, operating performance, legal conversion

JEL Classification: G14, G34

Suggested Citation

Eckbo, B. Espen and Nygaard, Knut and Thorburn, Karin S., Does Mandatory Board Gender-Balancing Reduce Firm Value? (February 20, 2022). Tuck School of Business Working Paper No. 4039292, European Corporate Governance Institute - Law Working Paper No. 629/2022, Available at SSRN: https://ssrn.com/abstract=4039292 or http://dx.doi.org/10.2139/ssrn.4039292

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)

HOME PAGE: http://tuck.dartmouth.edu/faculty/faculty-directory/b-espen-eckbo

European Corporate Governance Institute (ECGI)

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

Knut Nygaard

Oslo Business School at Oslo Metropolitan University ( email )

Pilestredet 35
Oslo, 0167
Norway

Karin S. Thorburn

Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway
+4755959283 (Phone)

HOME PAGE: http://www.nhh.no/cv/thorburn

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

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