Does female participation improve firm value? Board gender diversity reform and asymmetric market responses

In this paper we use the board gender diversity reforms as a quasi-natural experiment to study how female participation in the board affects firm values. We find that the market shows asymmetric responses in the short run vs. in the long run: the Jensen's alphas of the firms significantly increase after the board gender reform, but the short-run cumulative abnormal returns are significantly negative. Notably, these effects are stronger in European countries, where integrated regulatory frameworks amplify the positive impact on firm performance. Our empirical results are highly consistent with the literature that documents board gender diversity promotes innovations (Griffin et al., 2021): Short-run investor skepticism, transitional frictions, together with a constant beta may lead to a temporary negative CAR, but in the long run, higher level innovations lead to lower beta and better performance, resulting in higher Jensen's alpha.