Despite recent strides towards more gender diversity in the boardroom, new research highlighted by Harvard Business Review shows a worrying finding that shareholder bias toward female directors is at play.
But are investors walking the walk on board diversity? In a recent study, we examine board composition and financial data on 1,644 public companies in the U.S. between 1998 and 2011, controlling for numerous firm-specific characteristics like size and corporate governance structure. We find that companies that appoint women to the board see a decline in their market value for two years following the appointment (after which we no longer see any effect). In other words, investors seem to be penalizing, rather than rewarding, companies that strive to be more inclusive.