As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions

94 Pages Posted: 3 Jan 2019 Last revised: 13 Sep 2021

See all articles by Felix von Meyerinck

Felix von Meyerinck

University of St. Gallen - School of Finance

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance; University of Mannheim - Department of Finance

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Steven Davidoff Solomon

University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy; European Corporate Governance Institute (ECGI)

Date Written: August 31, 2021

Abstract

In 2018, California became the first U.S. state to introduce a mandatory board gender quota for all firms headquartered in the state. Even though the constitutionality of the law is still debated, we document large negative announcement returns to the adoption of the gender quota for California firms and large spillover effects for non-California firms. We show that these effects are not explained by frictions in the director labor market and propose a novel explanation: Shareholders’ disapproval of government interventions that impose new regulation on corporations. Consistently, we find that non-California firms in states that followed California’s legislative lead in the past by, e.g., introducing gender quota proposals, adopting stricter environmental laws, raising minimum wages, or legalizing cannabis react more strongly to the California gender quota. We also find that California and non-California firms with higher sensitivity to policy uncertainty react more negatively to the quota’s adoption.

Keywords: Gender quota, Regulation, Economic policy uncertainty

JEL Classification: J16, J78, G38, K38

Suggested Citation

von Meyerinck, Felix and Niessen-Ruenzi, Alexandra and Niessen-Ruenzi, Alexandra and Schmid, Markus and Davidoff Solomon, Steven, As California Goes, So Goes the Nation? Board Gender Quotas and Shareholders' Distaste of Government Interventions (August 31, 2021). European Corporate Governance Institute – Finance Working Paper No. 785/2021, Available at SSRN: https://ssrn.com/abstract=3303798 or http://dx.doi.org/10.2139/ssrn.3303798

Felix Von Meyerinck

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181 1595 (Phone)

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Steven Davidoff Solomon

University of California, Berkeley - School of Law ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States

University of California, Berkeley - Berkeley Center for Law, Business and the Economy ( email )

Berkeley, CA 94720-7200

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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