DP14942 Gender diversity in corporate boards: Evidence from quota-implied discontinuities

Author(s): Olga Kuzmina, Valentina Melentyeva
Publication Date: June 2020
Date Revised: February 2021
Keyword(s): Gender diversity, Gender quota, Performance, women in boards
JEL(s): D22, G32, J16
Programme Areas: Labour Economics, Public Economics, Financial Economics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14942

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".