Gender Diverse Boards May Have Less Inside Information

The debate on gender diversity on boards has reached the highest echelons of business and policymaking. Many academics have also sought to investigate whether hiring more female board members increases shareholder value. But is diversity a path to value creation? If not, should metrics like gender diversity be dismissed? A key problem with testing such hypotheses is always endogeneity: the fact that for example companies with a lot of female board representation have higher profitability could simply mean that more profitable firms hire more women. Endogeneity can lead to misleading conclusions hence also wrong decisions for such important matters. One way to get around this key problem is to focus on exogenous shocks, such as the imposition of mandatory gender quotas in Norway. K. Ahern and A. Dittmar find that this regulation had a negative effect on shareholder value. Of course, mandatory quotas are not representative of voluntary decisions to have more women on the board.