Abstract
We investigate stock market reactions to the announcement of the new, June 2022 European Union (EU) regulation on board gender diversity, which requires firms to appoint a minimum of 33% female directors (or 40% female non-executive directors). We find that the abnormal market returns surrounding the EU announcement are positive. We also note that the observed positive valuation effects are particularly strong for: (1) firms in countries with softer existing regulations on board gender diversity; and (2) firms with a larger gap between current levels of board gender diversity and the 33% gender quota. Our analysis of the EU legislation on gender quotas offers solid evidence that board gender quotas are perceived by investors as beneficial, particularly for firms exposed to a large gender imbalance.
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