Good name better than riches? New female director appointments and managerial competence

This study explores the relationship between new female director appointments and managerial ability for a sample of 18,216 US firm-year observations representing 1,885 distinct publicly traded firms. Using a two-stage instrumental variable, we find that new female director appointments are associated with a decrease in managerial ability. This effect is robust to alternative measures, endogeneity corrections, and matched sample approaches. However, while the consequences of new female director appointments also include reductions in labor productivity and cash flows, firms do benefit from an increase in intangible assets. In addition, with time, experience, and support, firms can profit from the appointment of a new female director.