Board Gender Diversity Reforms Around the World: The Impact on Corporate Innovation

Abstract

In response to persistent gender inequality in corporate leadership, many countries have implemented board gender diversity reforms, either through legislation or by revising governance codes for board appointments. While these reforms aim to enhance women's representation and influence in leadership roles, their effects on corporate outcomes, such as innovation, remains unclear. This study develops a two-mechanism institutional contingency model to investigate how board gender diversity reforms affect firm innovation through representation and empowerment mechanisms. Using a unique handcollected dataset on worldwide board gender diversity reforms and a quasi-experimental difference-indifferences design, we find that these reforms significantly improve innovation outcomes, with the empowerment mechanism having a stronger positive effect than the representation mechanism. Additionally, we show that rule-based reforms, while effective at increasing female board representation, often lead to symbolic compliance and tokenism, which limits their ability to enhance innovation. In contrast, comply-or-explain reforms, which emphasize empowerment and genuine engagement, yield more meaningful progress in firm innovation. Our findings also reveal that countries with higher pre-reform gender disparities and a larger pool of qualified female directors experience greater innovation gains following the implementation of these reforms. By distinguishing between the effects of representation and empowerment, this study provides a nuanced understanding of how gender diversity regulations can serve as catalysts for innovation and offers valuable insights for policymakers designing reforms to promote gender equality and economic outcomes.

Keywords: Board gender diversity reform, Gender inequality, Female representation, Female empowerment, Innovation