The Impact of a Principles-Based Approach to Director Gender Diversity Policy

We study the impact of a principles-based (i.e., comply or explain) approach to female representation on corporate boards. In contrast to the existing evidence on mandatory diversity regulation, we find that those firms most likely to be affected by this principles-based regulation exhibit positive abnormal returns around its announcement. Moreover, relative to control firms, they exhibit a 30% increase in the fraction of female directors over the longer term. We find that compliance with the gender diversity policy increases over time and that the main determinants of non-compliance are economic frictions related to the supply of qualified female directors.