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We revisit the value implications of female representation on boards by exploiting the board diversity campaign announcement by Norges Bank Investment Management (NBIM)—the world’s largest sovereign wealth fund. In February 2021, NBIM required its portfolio firms to have at least 30% female directors. Using NBIM’s announcement as a shock to investor expectations about female board representation, we document significantly positive returns for firms with a female director shortfall, concentrated in firms with low institutional ownership. Consistent with an investor demand view of board gender diversity, we find that these firms experienced a greater increase in ownership by socially responsible institutional investors and a greater decrease in their implied cost of capital following the announcement. Our results indicate that the documented positive valuation effects of gender diversity can be explained by a discount rate channel.

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