Do investors reward gender diversity? An event study of the MSCI World Women’s Leadership Index

Abstract

The aim of this thesis is to study how global markets value companies that exhibit a commitment towards gender diversity among their board of directors and among the leadership positions. We investigate how stock returns and trading volume are affected by inclusion in or exclusion from the MSCI World Women’s Leadership Index (WWLI). The effect is measured on both the date of announcement and the effective date of the index rebalancing. We use both global samples as well as geographically categorized subsamples to study the effects in North America, Europe, and Asia Pacific individually. The data is processed by removing observations from the dataset which are affected by confounding events that could bias the results. Our findings suggest that on an aggregate level, investors seem to value index inclusion, as we observe significant abnormal returns on the day of the event. In the geographical subcategories the results suggest that investors in Europe and Asia do not value, and rather punish firms included in the index. Furthermore, deletions yield no significant results, apart from in the European region where investors seem to penalize exclusion from the World Women’s Leadership Index. Neither inclusion nor exclusion appear to have a significant effect on trading volume. The results could potentially be biased by endogenous variables, as both inclusion and exclusion from the index could be explained by the same factor that causes abnormal returns.