The Quarterly Journal of Economics· 2012Q1
The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation *
- 1,589citations
- Q1SCImago
- 2012year
Short summary
Norway's 2003 law mandating 40% female board representation led to a significant drop in firm stock prices and Tobin's Q, indicating that firms were forced to compromise value-maximizing board compositions.
AI-generated from the title and abstract; the full text is not read.
Key points
- Mandated 40% female board representation caused a significant drop in stock price upon announcement.
- Tobin's Q declined substantially in the years following the quota implementation.
- The quota resulted in younger, less experienced boards and increased financial leverage.
- Operating performance deteriorated after the mandated board changes.
AI-generated from the title and abstract; the full text is not read.
Abstract
In 2003, a new law required that 40% of Norwegian firms' directors be women—at the time only 9% of directors were women. We use the prequota 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.
The authors' abstract, as published at the source. The Quarterly Journal of Economics, 2012 · DOI ↗
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Field: Gender Studies
Gender StudiesSocial Sciences