Director informativeness following board gender-balancing: Evidence from insider trading

We address the debate over whether forced board gender-balancing is likely to lower firm value. Ultimately, for firm value to remain unaffected, incoming female directors must exhibit a degree of director informativeness - the ability to quickly gain and vocalize a firm understanding of the factors driving firm value - that matches that of their male counterparts. The extant literature uses the incoming directors educational and professional background as indirect predictors of the unobservable degree of director informativeness. In this paper, we instead explore a measure of informativeness that more directly captures firm value: The stock market's assessment of the information quality signaled by non-routine primary insider purchases. We then use Norway's pioneering gender quota law and data on insider trades and ownership positions on the Oslo Stock Exchange (OSE) to test the hypothesis that the law's treatment effect on director informativeness is gender neutral. We find that the gender quota causes the average market reaction to female-director purchases to jump to become significantly positive and of a magnitude similar to that of male-director trades. In other words, after quota implementation, female directors are judged by investors to be as informed as their male counterparts. We also show that the market's perception of director informativeness increases with the board's general director network connectivity. Finally, regardless of gender, there is no evidence that positive market reaction to insider purchases translates into significant holding-period-adjusted abnormal performance by insiders.