The Added Value of Women in the Board: Evidence From Two-sided Matching Under Gender Quota Policies

To remedy the gender gap problem makeup of corporate upper echelons, a number of countries have resorted to legislative measures to improve gender representation in corporate boards. While these policies are usually heralded as solutions to labor market biases, they have also been criticized as being hard to implement due to firms’ difficulties to attract scarce talent. Critics point to possible unintended consequences of these regulations, such as a small number of women holding multiple appointments and further closing down opportunities for other candidates, or firms stumbling on “unqualified” candidates. We join the debate on the impact of gender policies by focusing on the structural features of the director labor market. We build on the idea that appointment of women directors is a manifestation of a matching process where firms have preferences over candidates and candidates have preferences over which firms to join. Therefore, the observed appointments are the outcome of mutual preferences, ability to attract qualified candidates, and opportunities to cherry-pick among options. This matching process is endogenous and cannot be captured by studies that are correlational in nature or those that report average tendencies and thus obscure important variation across firms and candidates. Empirically, we focus on the French context and the passing of Copé -Zimmerman Law in 2011, which has instituted a two steps quota policy of gender representation in the boards. We ask three related questions: 1) what factors (preferences) drive the matching of firms and candidates, before and after the quota policy? 2) do the matching factors (preferences) change or are they stable? 3) at the time of hiring, who, among women, is perceived as bringing higher “added value” for the governance of the firm? Preliminary results indicate that preferences have largely remained stable, with notable differences concerning public firms and better governed firms, who post-reform are better matched with qualified women candidates (both those with and without prior board experience). More strikingly, homophily in the elite status of existing board members and the women who join the boards has increased in importance after the reform. Our analysis indicates that the perceived “added value” of qualified but less experienced women (i.e. those with less or no prior board experience) increases dramatically after the reform, while the perceived “added value” of more experienced women and those with elite status remains stable. This result indicates that qualified women who were not entrenched in the existing network of board directors had most to gain due to the reform.