Regulating Gender Diversity: Evidence from California Senate Bill 826

Management Science (Forthcoming)

49 Pages Posted: 10 Mar 2023

See all articles by Abigail M. Allen

Abigail M. Allen

Brigham Young University - Marriott School

Aida Sijamic Wahid

University of Toronto - Accounting; University of Toronto - Rotman School of Management

Date Written: January 30, 2023


Do gender diversity quotas enhance firm value? This broad question has sparked significant debate because while diversity is generally thought to improve board functioning, prior research in international settings suggests mandating diversity may have adverse consequences if it moves firms away from market equilibrium. Exploiting the political events leading up to the passage of California Senate Bill 826 as an exogenous shock to assess the market implications of board gender composition, we document either significantly positive or insignificant 2-day abnormal returns for California firms across a variety of model specifications. Importantly, this finding contradicts the strong claims of contemporary studies of SB 826 that the California mandate was value destructive. We reconcile these findings by providing critical evidence that contemporaneous results lack robustness to alternative model specifications and provide an incomplete picture by failing to comprehensively examine a broader set of event dates or account for mixed messaging on the final event date. We also provide some evidence of significant negative abnormal returns to litigation milestones that threaten to overturn SB 826, with the magnitude increasing in the size of board gender deficits. Finally, we provide evidence that there is no observable decline in newly appointed female director quality following the implementation of SB826 either relative to pre-regulation appointments or to male director appointments. Collectively, our results suggest non-negative (if not positive) consequences to California firms arising from SB826 and directly counter assertions that mandated gender diversity is detrimental to firm value.

Keywords: gender, diversity, quotas, regulation, corporate governance, directors, SB826

JEL Classification: G34, G38, M48, M41, M14, K22

Suggested Citation

Allen, Abigail M. and Wahid, Aida Sijamic and Wahid, Aida Sijamic, Regulating Gender Diversity: Evidence from California Senate Bill 826 (January 30, 2023). Management Science (Forthcoming), Available at SSRN: or

Abigail M. Allen (Contact Author)

Brigham Young University - Marriott School ( email )

Provo, UT
United States

Aida Sijamic Wahid

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4

University of Toronto - Accounting ( email )

105 St George St
Toronto, ON M5S 3E6

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