When Norway required public-company boards to be at least 40 percent women, critics warned that shareholder value would suffer. Some even claimed the mandate knocked a fifth off firm value—a number that, as Tuck’s Espen Eckbo later argued, defied economic logic and careful econometrics. “How could swapping roughly two directors on a five-person board cause a 20 percent decline in value?” he recalls wondering. That early debate set the stage for his latest study: a clean, market-based test of whether the women who joined Norwegian boards became as informative to investors as men.
The Tuck Centennial Professor of Finance, Espen Eckbo studies corporate finance, with an emphasis on transactions in the market for corporate control (M&As and corporate restructurings), how firms raise capital to fund investments, capital structure choice, and issues in international corporate governance. He teaches Corporate Finance and Shareholder Activism and Corporate Takeovers in the MBA program.
What Does the Market Think?
In new research with Bernt Arne Ødegaard of the University of Stavanger, in Norway, Eckbo uses an ingenious proxy for a director’s information advantage: the stock market’s immediate reaction when insiders legally buy their own company’s shares. In Norway (and the U.S.), those trades must be reported within 24 hours, and decades of evidence show that purchases—not sales—are followed by large, positive bumps in stock price. “We use that market reaction as a proxy of how informed the insider appears to the market,” Eckbo says. If investors think a director truly knows what she’s doing, they bid the stock up in the days following the purchase.
The paper studies every insider trade on the Oslo Stock Exchange from 1997 to 2016—before and after full compliance with the quota in 2008—and estimates the cumulative abnormal return (CAR) over a three- and seven day window centered on each purchase. In the pre-quota years, men’s insider buys reliably moved prices; women’s, on average, did not. After the mandate, that changed abruptly: the average market reaction to women’s purchases jumped to roughly the same magnitude as men’s—about 1.5 percent in the three day window and 1.4 percent in the seven day window. In short, once boards were gender-balanced, investors treated women and men as equally informative insiders.
The Network Effect
Why the shift? One clue comes from networks. Norway’s reform didn’t expand the number of seats per director, but it reshaped the web of connections across boards. Using a PageRank-style centrality score, Eckbo and Ødegaard show that market reactions to insider purchases are stronger when the board is better connected to other boards. Connections seem to help directors interpret firm-specific evidence, in the same way that a seasoned peer network enhances an executive’s real-time judgment. Crucially, this effect holds regardless of gender—and it’s not simply that “busy” directors (those sitting on three or more boards) are driving the result. Busyness doesn’t explain informativeness; connectivity does.
Skeptics might ask: if insiders are informative, do they quietly mint superior long-run returns by trading on that edge? The answer here is surprisingly sober. Using holdings-based performance measures that account for each insider’s actual holding period, the authors find no statistically significant abnormal performance for either gender—before or after the quota. That reconciles two facts: the market boosts modestly when insiders buy, but insiders rarely “round-trip” those shares quickly enough to lock in the announcement gain. As Eckbo puts it, “There’s no long-run abnormal return coming out of these trades.”
The financial crisis provides a second, revealing experiment. By 2008–2010, quotas were fully in place; then came an exogenous, economywide price shock. If women directors were more risk-averse—as some argued—they should have pulled back. Instead, women and men both increased their buying propensities, with women’s surge especially pronounced in 2009. A statistical analysis confirms the pattern: the “crisis” indicator significantly raises the likelihood of purchases for men and women directors by almost identical amounts and lowers the likelihood of sales. That symmetry, the authors argue, is what you expect when informativeness—not gender—drives directors’ willingness to buy when prices look too low.
Firms appoint women directors who … are as informed about their respective firms’ value prospects as their men counterparts.”
The Bottom Line
The broader takeaway is quite straightforward. Norway’s gender-balancing mandate did not dilute boards with less capable directors, nor did it produce a risk-averse cohort that shied away from buying when it mattered. Instead, women directors quickly became as informative to markets as men, and the market recognized it. As the authors put it, the post quota jump in women’s CAR “suggests that firms appoint [women] directors who … are as informed about their respective firms’ value prospects as their men counterparts.” For policymakers and companies navigating similar reforms, that’s an important, evidence-based benchmark.
Eckbo sees the result as part of a longer arc of research that has revisited sweeping early claims about the quota’s costs. When the empirical lens is sharpened—first to valuation effects, and here to what insiders know—the story looks neutral to positive, not negative. “If there’s no significant damage to firms, you’d expect these women to be as informative,” he says. “And that’s what the insider trading data confirm.”
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