The Employment Non-Discrimination Act and Board Gender Diversity

Abstract

Many US states have adopted Employment Non−Discrimination Acts (ENDAs) to ensure workplace equity and prohibit discrimination based on sexual orientation or gender identity. This study examines if and how the staggered introduction of ENDAs across US states from 2001 to 2018 influences board gender diversity. Using a stacked difference-in-difference analysis with entropy-balanced matching, we identify a 4.3% increase in female board representation for firms headquartered in states that implement ENDAs, relative to the median level of board gender diversity. We employ both internal and external instrumental variable approaches to validate our primary findings. Notably, the effect is more pronounced in firms with female leadership and is reversed in firms led by Republican-leaning executives. Moreover, post-ENDA diversity increases are stronger in firms headquartered in Democrat-voting states and those where pre-existing diversity concerns are higher. Further analysis indicates that female board members are more likely to be independent directors and serve on compensation or audit committees. Drawing on isomorphism and spillover theories, our study provides original evidence that ENDAs embed prosocial norms within firms, generating a spillover effect, whereby the inclusivity and diversity fostered at state level in turn enhance board gender diversity at firm level.