previously CESifo working paper, winner of the 50th EFA best doctoral tutorial award
This paper investigates whether and how company boards affect firm performance. I study a regulation in France that exogenously changed boards by mandating a minimum representation of each gender for firms above a certain size threshold. I show that the new boards increase various measures of profitability by 4 to 9%. The rise in profits occurs mainly through cuts in the SG&A revenue cost share and more specifically changes in the composition of outsourced workers. On the output side, I find that firms expand their market share and their product variety as well as increase plant-level specialization. I use a random effects approach jointly estimating board output and formation to infer member quality. I decompose profit variance and tie back the substantial gains from the regulation to individual traits being complementary inputs in the board on top of individual ability and sorting.