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Mandatory Gender Balance and Board Independence
Author(s) -
Bøhren Øyvind,
Staubo Siv
Publication year - 2016
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12060
Subject(s) - independence (probability theory) , accounting , shareholder , business , shock (circulatory) , gender balance , gender diversity , demographic economics , balance (ability) , corporate governance , shareholder value , value (mathematics) , enterprise value , on board , monetary economics , economics , psychology , finance , statistics , medicine , sociology , mathematics , gender studies , neuroscience , engineering , aerospace engineering
We find that forcing radical gender balance on corporate boards is associated with increased board independence and reduced firm value. A mandatory 40% gender quota shifts the average fraction of independent directors from 46% to 67% because female directors are much more often independent directors than males are. This shock to board independence via gender quotas is strongest in small, young, profitable, non‐listed firms with powerful stockholders and few female directors. Such firms also lose the most value, presumably because they need advice from dependent directors the most and monitoring by independent directors the least.