Jon Klick finds that when courts in CA surprisingly invalidated a set of DEI laws, the market value of firms subject to those laws increased:
California mandated that firms headquartered in the state include women (SB 826) and underrepresented minorities (AB 979) on their corporate boards. These laws, passed in 2018 and 2020 respectively, were held to violate the state’s constitution by judges on the Los Angeles County Superior Court in 2022. This paper examines the market reaction to these surprising court decisions, finding that California firms appreciated significantly on the days of the rulings…Because the court decisions arguably had no repercussions for other changes in corporate law and regulation in the state…these results improve confidence in the conclusion that board diversity mandates do not improve firm value and, perhaps, they even lead investors to lower their valuations.
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