A Gender Quota for Top Executives: Effects on Diversity and Performance

We study Germany’s landmark quota requiring major public companies to hire a female top executive. We find that the quota significantly increased top executives’ gender diversity at targeted firms. Firms drew new women primarily from outside of their leadership ranks and professional networks, and new female executives were mainly recruited into HR and less common board roles. Although stock market returns show a negative response to the initial call for a quota, this pattern reversed as the quota was codified into law, and we find no discernable lasting effects on firms’ operating profit or market valuation.