Hwang, Sunwoo and Shivdasani, Anil and Simintzi, Elena, Mandating Women on Boards: Evidence from the United States (October 13, 2018). Available at SSRN: https://ssrn.com/abstract=3265783
On September 30, 2018, California became the first US state to mandate women directors on corporate boards. The passage of this law resulted in a significant decline in shareholder value for firms headquartered in California. The decline in shareholder value is directly related to the number of female directors that firms are required to add to the board. We argue that supply-side constraints contribute to the costs imposed by the mandate. The expected costs of additional female directors are higher for firms that face a more limited director pool and for those with weak corporate governance. Our findings indicate that mandated increases in gender diversity on corporate boards are detrimental to shareholder value.