The Impact of a Principles-Based Approach to Director Gender Diversity

64 Pages Posted: 27 Aug 2021 Last revised: 22 Dec 2022

See all articles by Tor-Erik Bakke

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Hamed Mahmudi

University of Delaware - Department of Finance

Aazam Virani

University of Arizona - Department of Finance

Date Written: August 23, 2021

Abstract

We study the impact of a principles-based regulatory approach to female representation on boards, requiring firms to disclose gender diversity policies or lack thereof. Although adding females to boards is not mandatory, firms subject to the regulation increase their fraction of female directors by 38% relative to control groups. Firms most likely to be impacted by the regulation exhibit positive abnormal announcement returns. Post-regulation, firms are increasingly likely to adopt female director target ratios and disclose that they consider gender diversity in board nominations. Firms with less access to female directors are most likely to explain their lack of diversity.

Keywords: Director Gender Diversity, Comply or Explain Governance, Boards of Directors, Regulation, Disclosure  

JEL Classification: G34, G38, G14, K22, J21

Suggested Citation

Bakke, Tor-Erik and Field, Laura Casares and Mahmudi, Hamed and Virani, Aazam, The Impact of a Principles-Based Approach to Director Gender Diversity (August 23, 2021). Available at SSRN: https://ssrn.com/abstract=3910116 or http://dx.doi.org/10.2139/ssrn.3910116

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
6087707753 (Phone)

HOME PAGE: http://https://sites.google.com/site/tebakke/

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Hamed Mahmudi (Contact Author)

University of Delaware - Department of Finance ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Aazam Virani

University of Arizona - Department of Finance ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

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