From Equality to Profitability: The Impact of Belgium’s Board Gender Quota on Female Representation and Firm Performance

Abstract

This paper analysed Belgium’s mandatory gender quota for corporate boards and how this affected female representation and firm profitability in the short- and long-term. The study partially follows the methodological approach by Matsa and Miller (2013), employing a Difference-in-Differences (DiD) estimation. The analysis is conducted using a sample of 393 firms, including Belgian listed firms as the treated group, and Polish listed and Belgian unlisted firms as two separate control groups. To confirm the robustness of findings, an additional Instrumented DiD analysis was run, which supported the initial outcomes. As part of the ethical argument of a gender quota, this study finds that the Belgian quota improved the proportion of women directors beyond the required minimum threshold of about one-third in the long-term, which implies that the quota resulted in lasting changes in board appointment practices. In terms of the business-case considerations of a gender quota, findings indicate that there is neither a positive, nor a negative effect of the quota on firm profitability both in the short- and long-term. Thus, any business-case arguments against the quota are rejected by this paper. Overall, findings suggest that the Belgian gender quota was able to fulfil its ethical goal of improving gender equality without harming financial performance of the firms. This strengthens the case for a broader adoption of such quotas.