Mandating Women on Boards: Evidence from the United States

71 Pages Posted: 17 Oct 2018 Last revised: 18 Aug 2021

See all articles by Sunwoo Hwang

Sunwoo Hwang

Korea University Business School

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School

Elena Simintzi

Centre for Economic Policy Research (CEPR); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: October 13, 2018

Abstract

On September 30, 2018, California became the first U.S. state to set quotas for women directors on corporate boards. The passage of this law resulted in a significant decline in shareholder value for firms headquartered in California. The decline in shareholder value is directly related to the number of female directors that firms are required to add under these quotas. We argue that supply-side constraints contribute to the costs imposed by the mandate. The expected costs of the quotas are higher for firms that face a more limited director pool and for those with weak corporate governance. Earnings forecasts for California firms also decline after the passage of the law. The law is associated with a widening of credit default spreads for affected firms, suggesting that differences in risk-taking preferences between male and female directors do not explain the results.

Keywords: board of directors, gender diversity, female, women, directors

JEL Classification: G3, K2, J2, J7

Suggested Citation

Hwang, Sunwoo and Shivdasani, Anil and Simintzi, Elena, Mandating Women on Boards: Evidence from the United States (October 13, 2018). Kenan Institute of Private Enterprise Research Paper No. 18-34, Available at SSRN: https://ssrn.com/abstract=3265783. or http://dx.doi.org/10.2139/ssrn.3265783

Sunwoo Hwang

Korea University Business School ( email )

Seoul
Korea, Republic of (South Korea)

HOME PAGE: http://www.sunwoohwang.com

Anil Shivdasani (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

Elena Simintzi

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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