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Gender: Policy, Perception and Firm Value

Paper Session

Friday, Jan. 3, 2020 2:30 PM - 4:30 PM (PDT)

Manchester Grand Hyatt, Seaport G
Hosted By: American Finance Association
  • Chair: Heather Tookes, Yale University

Public Attention to Gender Equality and the Demand for Female Directors

Mariassunta Giannetti
,
Stockholm School of Economics
Tracy Wang
,
University of Minnesota

Abstract

We show that public attention to gender equality has different effects on the implicit attitudes towards career women of individuals with different ex ante preferences and beliefs. On this basis, we conjecture that changes in public attention to gender equality have different effects on the demand for female directors of firms with different ex ante culture. We find that public attention is associated with an increase in female board representation, but only in firms whose culture is more sympathetic to gender equality. There is no evidence that the effects of public attention to gender equality are limited by the supply of eligible directors. We also provide evidence that public attention to gender equality changes the way female directors are recruited. First, heightened public attention leads listed companies to reach out to a broader pool of potential female directors. This increase in demand does not appear to be associated with any obvious compromises on the quality of newly appointed female directors. Second, firms have higher propensity to appoint men with connections to the current CEO or to current board members than similarly connected women. Public attention to gender equality reduces the reliance on connections in appointments, especially for male directors, leading to higher female representation on the board of listed companies.

As California Goes, so Goes the Nation? Board Gender Quotas and the Legislation of Non-Economic Values

Felix von Meyerinck
,
University of St. Gallen
Alexandra Niessen-Ruenzi
,
University of Mannheim
Markus Schmid
,
University of St. Gallen
Steven Solomon
,
University of California-Berkeley

Abstract

In 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in the state. We document negative announcement returns to the adoption of the quota for Californian firms, but also large negative spillover effects on a matched group of non-Californian firms, particularly those located in states that followed California’s legislative lead in the past by raising minimum wages or legalizing cannabis. Frictions on the director labor market only explain a small fraction of value losses of Californian firms. They do not explain the negative spillover effects on firms in other states. We propose shareholders’ fear of further legislation of non-economic values as a new explanation for the negative announcement returns to gender quotas. In line with this view, we find that firms with higher policy sensitivity show the strongest reaction.

Feminist Firms

Benjamin Bennett
,
Ohio State University
Isil Erel
,
Ohio State University
Lea Stern
,
University of Washington
Zexi Wang
,
Lancaster University

Abstract

We examine whether reducing frictions in the labor market affects the performance of private and public firms. Using the staggered adoption of state-level Paid Family Leave acts, we provide causal evidence on the value created by relieving frictions to female talent allocation. The magnitude of firms’ improved performance is correlated with their exposure to the laws. We document that reduced turnover, increased productivity, and female leadership are important mechanisms leading to the observed performance gains.

On the magnification of small biases in decision-making

Shaun Davies
,
University of Colorado
Edward Van Wesep
,
University of Colorado
Brian Waters
,
University of Colorado

Abstract

We analyze a setting in which an actor chooses between N ex ante identical options. She can exert effort to learn about the quality of each option, but can ultimately choose only one. Under quite general conditions, optimal effort is asymmetric: a large amount of effort is expended learning about one arbitrarily chosen option, less on another, even less on a third, etc. This implies asymmetric likelihoods of each item being chosen. If the actor has an infinitesimal bias in favor of one option, then the actor selects an effort vector that maximizes the likelihood of her favored option being chosen. Small biases are magnified, sometimes enormously. We also show that a glass ceiling can arise, in which favored types are increasingly prevalent as one ascends the corporate ladder. These results have implications for portfolio selection (e.g., home bias, socially responsible investment funds), hiring (e.g., CEO choice, the glass ceiling), start-up funding, and a variety of other applications. The results also have implications for the optimal design of randomized experiments: different numbers of subjects should be assigned to each treatment. This applies to advertisers running focus groups to decide on an ad campaign or an ending for a movie, or to credit card lenders sending mailers to determine the optimal card to offer.
Discussant(s)
Geoffrey Tate
,
University of Maryland
Daniel Ferreira
,
London School of Economics
Liu Yang
,
University of Maryland
Laura Veldkamp
,
Columbia University
JEL Classifications
  • G3 - Corporate Finance and Governance