As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions
84 Pages Posted: 3 Jan 2019 Last revised: 7 Dec 2022
Date Written: December 6, 2022
Abstract
In 2018, California became the first U.S. state to adopt a mandatory board gender quota for all firms
headquartered in the state. In 2022, it became the first U.S. state to invalidate a board gender quota. We document large negative abnormal returns to the adoption of the gender quota for California firms and large spillover effects to non-California firms. We show that director labor market frictions are not the main driver of these effects and propose a novel explanation: Shareholders’ distaste of stakeholder-friendly government interventions. Consistently, we find that more stakeholder-friendly firms, measured by their ESG scores or presence of SRI funds among their shareholder base, react more positively to the California gender quota. We also find that California and non-California firms with higher sensitivity to regulatory uncertainty react more negatively to the quota’s adoption, and more positively to its invalidation. For non-California firms, the effects are concentrated among firms in states that are likely to follow California’s legislative lead.
Keywords: Gender quota, Regulatory uncertainty, Director labor market
JEL Classification: J16, J24, G38, K38
Suggested Citation: Suggested Citation