“What Drives Racial Diversity on US Corporate Boards?”, 2021-11-18 (; similar):
We investigate the trends and drivers of racial diversity on US corporate boards.
We document that US boards are persistently racially homogenous, but that this is changing. About 10% of directors on the average board during our sample are non-white, however, new director appointments of racial minorities increased from 12% in 2013 to over 40% in 2021. Smaller, value firms are less likely to appoint minority directors and through 2019 firms with racially homogenous boards are also less likely to. In 2020, this trend sharply reverses such that by 2021 firms with racially homogenous boards actually seek minority directors. This reversal coincides with the commencement of the racial justice movement as well as diversity initiatives implemented by the NYSE, Nasdaq, and state of California.
Our analysis of these initiatives reveals that the racial justice movement was the primary cause of the changes in minority director appointment behavior. Conservative estimates imply that it led to a 120% increase in the number of black directors appointed to boards, but did little to help other minority groups. In contrast, the California diversity mandate has thus far, primarily benefited racial groups that are not traditionally underrepresented and has suppressed appointments of black directors. Newly appointed minority directors have similar qualifications to those appointed before the racial justice movement.
Markets did not systematically react to any of the events that we investigate.
Our analysis is suggestive of search frictions and racial bias being important to the persistent lack of board racial diversity that we document.
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