The Economic Consequences of a 'Glass-Ceiling' : Women on Corporate Boards and Firm Value

Less than 15% of global board seats are held by women. The economic consequences of this low representation of women at the top of corporations are not well understood. One potential effect of a more rigorous selection of female board members is that those few who make it to the top exhibit superior qualifications. To investigate how women on corporate boards affect firm value, we analyze capital market reactions to exogenous board member departures due to death or illness. The market reacts about one percentage point more negatively to departures of women compared to men. This negative reaction is more pronounced in countries where the selection of women is more stringent and fewer women serve on boards. Thus, women on boards seem to provide economic benefits not because of their gender, but due to an omitted variable related to gender - higher qualifications resulting from more rigorous selection. These results imply that gender-biased selection processes lead to sub-optimal economic outcomes