Thematic Indexing and Corporate Behavior: Evidence from MSCI’s Empowering Women Index

Abstract

We examine whether thematic stock market indices influence corporate behavior using Japan’s adoption of MSCI’s Empowering Women Index in 2017. Backed by the Government Pension Investment Fund, the index promotes gender diversity by selecting firms meeting specific criteria. Using a difference-in-differences approach, we find that firms aiming for inclusion improve gender diversity, particularly in managerial roles. These firms also reduce overtime and expand paternity leave, reflecting a shift in corporate culture. Further, firms added to the index experience positive stock market reactions and greater institutional ownership. Customer awareness and expectations of institutional investment motivate firms to pursue index inclusion.

Keywords: Gender diversity, women in the workforce, corporate behavior, thematic indices, institutional ownership, WIN

JEL Classification: G30, G23, M14