That simply didn’t make economic sense.
B. Espen Eckbo
Stock market data undermine myths about female board members
A new study based on Norwegian stock market data shows that financial markets have just as much confidence in female as in male board members. Women are also no more risk-averse than men.
In the new study, the researchers analyze how the market reacts when board members buy shares in their own company – so-called insider purchases. Such trades are often interpreted as a sign that the stock is undervalued.
`This is a completely different way of studying the effects of board quotas, ´ says B. Espen Eckbo, Professor at Tuck School of Business and Adjunct Professor at NHH.
When Norway introduced a requirement that at least 40 percent of board members in listed companies must be women, critics warned of serious negative consequences. One claim in particular gained traction: that the reform had dramatically reduced companies’ market value.
`The claim was that market value fell by around 20 percent. That simply didn’t make economic sense, ´ Eckbo says.
A controversial debate
Those claims were later challenged by Eckbo, NHH professor Karin Thorburn , and Knut Nygaard at Oslo Metropolitan University. They identified an econometric error in the original analysis. Once corrected, the effect disappeared. There was no statistically significant decline in firm value.
`The reform did not appear to impose any costs, ´ Eckbo says.
Still, the idea persisted that board quotas might have more subtle negative effects – for example, that boards had become less “informative” and made weaker decisions.
What the market actually does
In the new study, co-authored with Professor Bernt Arne Ødegaard at the University of Stavanger, the researchers approach the question from a new angle.
They examine how the market reacts when board members buy shares in their own company. The study analyzes all reported insider purchases on the Oslo Stock Exchange from 1997 to 2016, both before and after the quota requirement was fully implemented in 2008.
`If the market trusts the information behind the purchase, the share price reacts immediately, ´ Eckbo explains.
Insider trade is legal but must be reported within 24 hours. Previous research shows that purchases – not sales – are typically followed by positive price reactions.
`We use the market reaction as an indicator of how informed the insider appears to investors, ´.
Reference:
Eckbo, B. Espen & Ødegaard, Bernt Arne: Director informativeness following board gender balancing: Evidence from insider trading (2025) i Journal of Corporate Finance They examine how the market reacts when board members buy shares in their own company. The study analyzes all reported insider purchases on the Oslo Stock Exchange from 1997 to 2016, both before and after the quota requirement was fully implemented in 2008.
A clear before-and-after effect
Before the quota, when women made up around 15–20 percent of board members, the market reacted strongly to men’s insider purchases. On average, women’s purchases triggered no clear price response.
After the quota, this changed sharply. The market reaction to women’s insider purchases rose to the same level as for men – about 1.5 percent over a few days.
`In other words, the market now views female and male board members as equally informative, ´ Eckbo says.
If the quota had led to “weaker” board members, one would expect the market to interpret women’s insider purchases as less informative. Instead, the opposite happened: after the reform, purchases were seen as equally informative, regardless of gender.
In other words, the market now views female and male board members as equally informative.
B. Espen Eckbo
Networks – not gender
Why did this change occur?
According to the researchers, the explanation is not gender itself, but how boards are connected within broader networks.
`The quota led to boards becoming more closely connected to each other. When boards have better links to other boards, members gain access to more information. This applies to both women and men, ´ Eckbo says.
The study shows that market reactions are stronger when boards are well integrated into networks of other boards. What matters most is not how many boards positions an individual holds, but how well the board itself is embedded in a broader information network.
The financial crisis as a stress test
The study also offers rare insight into how board members behave under extreme market conditions. The financial crisis of 2008–2009 serves as a “stress test” because it was a broad, external shock not driven by individual firms or boards.
If women were more risk-averse than men, they would have bought fewer shares when markets fell. We don’t see that.
B. Espen Eckbo
`If women were more risk-averse than men, they would have bought fewer shares when markets fell. We don’t see that, ´ Eckbo says.
On the contrary, both women and men increased their insider purchases during the crisis, with women’s increase particularly strong in 2009. This suggests that decisions were driven by value assessments, not by gender-specific risk aversion.
`Instead of asking people in surveys about their risk preferences, we look at actual behavior: do you buy when prices fall? That’s a direct, observable action, ´.
Do they make money from it?
A natural question is whether more “informative” board members systematically profit from insider trading over time. The answer is no.
`Even though prices react positively when purchases are disclosed, we find no abnormal long-term returns for insiders, ´ Eckbo says.
The explanation is simple: the initial price increase represents a paper gain that may never be realized – and can disappear if the shares are held for a long time.
There is no persistent abnormal return from these trades.
When politicians introduce such reforms, it is important to know what they actually cost.
B. Espen Eckbo
Important for policymaking
According to Eckbo, the study is particularly relevant because board quotas are a major policy intervention.
`When politicians introduce such reforms, it is important to know what they actually cost. Our results show that the quota in listed companies has not had measurable negative effects, ´.
At the same time, he stresses that the findings cannot automatically be applied to smaller, non-listed firms.
For Eckbo, the results fit into a broader research agenda: when one sharpens the empirical focus – first on firm value, and now on how markets interpret insiders’ actions – the story becomes far more moderate than the dramatic claims made early in the debate.
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