Working Paper: CEPR ID: DP14942
Authors: Olga Kuzmina; Valentina Melentyeva
Abstract: Using data across European corporate boards, we investigate the effects of quota-induced female representation on firm value and operations. We use quasi-random assignment induced by rounding and find that promoting gender equality is aligned with shareholder interests. This result is in stark contrast with previous work finding large negative effects of women on firm value. This discrepancy arises because these papers considered firms with different pre-quota shares of women to be good counterfactuals to each other. In our data, we see that such firms grew differently already before the regulation, resulting in a negatively biased estimate of the effect. We overcome this bias by considering sharp increases that arise whenever percentage-based regulation applies to a small group of people. We further show that these large positive effects of female directors are not explained by increased risk-taking or changes in board characteristics, but rather by scaling down inefficient operations and empire-"demolishing".
Keywords: gender diversity; women in boards; gender quota; performance
JEL Codes: J16; J48; G34; G38; C18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in share of women on boards (G34) | decrease in inefficient operations (D61) |
| increase in share of women on boards (G34) | decrease in merger-related expenses (G34) |
| increase in share of women on boards (G34) | decrease in fixed asset purchases (G31) |
| increase in share of women on boards (G34) | increase in Tobin's Q (D25) |