Will Nasdaq's Diversity Rules Harm Investors?

Will Nasdaq's Diversity Rules Harm Investors?

Jesse Fried

Series number :

Serial Number: 
579/2021

Date posted :

April 12 2021

Last revised :

April 12 2021
SSRN Share

Keywords

  • NASDAQ • 
  • SEC • 
  • Corporate governance • 
  • boards • 
  • diversity

In December 2020, Nasdaq asked the Securities and Exchange Commission to approve new diversity rules. The aim is for most Nasdaq-listed firms to have at least one director self-identifying as female and another self-identifying as an underrepresented minority or LGBTQ+.

While Nasdaq claims these rules will benefit investors, the empirical evidence provides little support for the claim that gender or ethnic diversity in the boardroom increases shareholder value. In fact, rigorous scholarship—much of it by leading female economists—suggests that increasing board diversity can actually lead to lower share prices. Adoption of Nasdaq’s proposed rules would thus generate substantial risks for investors.

Authors