Welcome on Board: The Spillover Effects of Mandatory Gender Quotas

Title: Welcome on Board: The Spillover Effects of Mandatory Gender Quotas (with Luigi Guiso and Fabiano Schivardi)

Abstract: The efficacy of board quotas as a policy to foster gender balance in the corporate world relies on the expectation that its effect can trickle down vertically inside the firms targeted by quota law ‑ improving the working conditions of other female employees ‑ and/or spill over horizontally to other firms in the economy. As research has found little evidence so far for vertical trickle-down effects, we investigate horizontal spillovers. We examine the 2011 Italian law that required listed and state-controlled enterprises (target companies) to significantly increase the number of board seats assigned to directors of the under-represented gender. Within the universe of Italian corporations, we identify “connected” firms as non-target firms that shared at least one board member with target companies in the years prior to the reform. We document that connected firms significantly increase the share of female board members after the reform as compared to similar non-connected firms, despite not being subject to the new law requirements. The spillover is quantitatively large, as it implies an overall increase in the number of new female directors at least twice as large as that computed on target firms alone. Connected firms are more likely to hire new female directors after the reform, and newly appointed directors, both male and female, are hired drawing from a broader geographical area, tend to have fewer prior connections with older board members, and are more likely to be firm outsiders. This suggests that the change in search technology induced by the reform may spill over to connected firms as target firms share information on new professionally selected candidates for directorship positions.