GENDER DIVERSITY IN CORPORATE BOARDS: Evidence that quotas can promote equality without costs to shareholders

Contrary to the established view, gender quotas are not necessarily a costly way of promoting equality. That is the central message of research by Olga Kuzmina and Valentina Melentyeva, to be presented at the annual congress of the European Economic Association in August 2020.

Gender equality has become high on the agenda of policy-makers around the world. In an attempt to improve the situation in the world of business, many countries have introduced gender quotas for corporate boards.

Previous research, which explored the setting of the pathfinder – Norway – produced mixed results and seemed mostly to suggest a negative impact (Ahern and Dittmar, 2012; Matsa and Miller, 2013). Consequently, this supported a view that the equality might be promoted at the expense of shareholders and created a policy dilemma. 

The new study shows that this policy dilemma might actually not be there, using data from all European countries that introduced percentage-based quotas for public companies, including United Kingdom, France, Italy, Belgium, Spain, the Netherlands and Norway.

Expanding the analysis beyond Norway and using a new empirical strategy, the authors provide evidence that quota-induced representation of women is not in fact value-destructing for shareholders. According to their findings, the Tobin’s Q ratio rises significantly, by about 1.5, for every 10 percentage points increase in the quota-induced share of women directors. 

Investigating further, they find that this is predominantly explained by a fall in total assets, rather than an increase in market value: the buy-and-hold returns of investing in firms with relatively more versus fewer women are similar. 

Exploring potential explanations, they find that board quality (such as average age or the number of qualifications) stays the same when more women join, and boards with more women have better meetings attendance. The fall in total assets is also accompanied by a temporary fall in operating performance: the study documents a significant decline in sales and larger employment reductions.

Since these changes in operating performance are not viewed negatively by the market, the authors interpret this in the way that newly appointed women directors scale down the inefficient operations. 

Overall, these results highlight that gender quota is not necessarily a costly instrument for promotion of equality.



Olga Kuzmina, New Economic School and CEPR

Valentina Melentyeva, ZEW and University of Mannheim 


Valentina Melentyeva, Researcher – ZEW, PhD Candidate in Economics – University of Mannheim