Index Design and Workforce Gender Diversity

We examine the impact of index design on workforce gender diversity in a unique setting in Japan. In 2017, Japan's Government Pension Investment Fund adopted the MSCI Empowering Women Index, which requires firms to meet specific criteria for advancing women employees. Using a difference-indifferences methodology, we find that firms striving for index membership enhance gender diversity, particularly in managerial roles. These firms also reduce overtime work and increase paternity leave, reflecting a shift toward a more inclusive corporate culture. Our findings suggest that customer awareness and increased institutional ownership motivate firms to seek inclusion in the index.