Women Don't Mean Business? Signaling Effect of Female Board Appointments and Consequences for Firm Value

• In Event: 429 - Section on Organizations, Occupations and Work Paper Session. Gender at Work

Abstract

This paper explores the relationship between female board appointments and firm value, and provides evidence of a signaling effect to explain the drop in market value experienced by firms with gender-diverse boards. Using panel data as well as the results of an online experiment, we show that investors penalize firms that choose to appoint female directors, in a manner not justified by underlying firm performance. We also show empirically that appointing a female director causes the firm to be perceived as less profit-oriented than when appointing a male director. This suggests that female board appointments are viewed as social performance initiatives not directly related to maximizing shareholder value and, as in the case of similar social performance measures, will result in a market penalty.

Authors

• Isabelle Solal, INSEAD

• Kaisa Elina Snellman, INSEAD

• Eric Uhlmann, INSEAD