The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation. Study about the impact of the Norwegian quota
In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.
Ahern, Kenneth R. and Dittmar, Amy K., The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation (May 20, 2011). Available at SSRN: http://ssrn.com/abstract=1364470 or http://dx.doi.org/10.2139/ssrn.1364470