H YPOTHESES

In order to utilize our data fully for analysis while at the same time testing the theory presented in the previous sections, the subsequent paragraphs present the four hypotheses that will be tested.

Hypothesis I:

Theory regarding gender diversity in the board room signifies the importance of heterogeneous boards i.e. boards that are diverse with respect to expertise, network and gender. An increase in the number of female board members may increase the gender diversity in most cases i.e. where the number of females represented is inferior to men.

Therefore, an increase could be viewed as positive by the market.

On the other hand, there is no evidence of this being the case. As seen in the Introduction, there is a remarkable low female representation on boards suggesting that the best candidates (i.e. in general and in the eyes of the shareholders) are men. This would suggest that increasing the number of female members will lead to a stock price decline, since there are better qualified, male candidates. With these arguments in mind, our study is conservative as the burden of proof is levied on the theory. The null-hypothesis is based on there being no relationship between stock prices and an increase in the number of female board members.

The alternative hypothesis is the opposite i.e. that increasing the number of women on the board produces a change in the stock price.

H0: An increase in the number of female board members will not affect firm value

HA: An increase in the number of female board members will affect the firm value and produce abnormal returns

Hypothesis II:

As stated in the earlier discussion there is an absence of theory regarding the gender equality and the effects on the firm in terms of stock prices changes. When also including The Law we have an area that has yet to be analyzed.

Initially, The Act was criticized by media and opposition parties. As time went by the criticism diminished. The reduced negative attention may be explained by the systematic actions undertaken by the government to increase awareness of gender equality in the boardroom. This may have lead to the market having less of a negative view on The Act. On the other hand, since the requirement of gender equality on the corporate board was made legal, the market may view an increase of a woman on the corporate board as positive merely as a result of the company complying with the new regulations. To investigate this notion, we compare changes in stock prices prior to and after The Act was imposed. The null-hypothesis is also here that there is no change in prices.

H0: An increase in the number of female board members prior to and after The Act does not affect firm value

HA: An increase in the number of female board members prior to and after The Act does affect firm value

Hypothesis III

As presented, one of the main arguments against The Law was implications it would have for small and semi-small companies. The argument was that that these companies do not have the same access to an international pool of women nor a domestic pool of women with the desired industry competence, as larger companies. If this critic is valid we may observe that these firms experience a value reduction when appointing a female director. An explanation for this could be that the pool of female candidates is smaller for these firms and directors with the adequate competence are not recruited.

On the other hand, the government focused on the competence held by females thus believing that the pool of possible candidates is sufficient. This suggests that the small and semi-small companies’ argument of there being few, qualified women, is not valid and may be a result of a threat towards men’s influence on the board (Weber 2004). When dividing our sample into small and semi-small companies on one side and large companies on the

other we can analyze differences between the two. The evidence is again put on the corporate board theory and our null-hypothesis is therefore conservative:

H0: There is no difference in CAR between small- and semi-small companies, and larger companies

HA: There is a difference in CAR between small- and semi-small companies, and larger companies

Hypothesis IV

ECON’s study from 2003 shows that the female representation varies among industries. As presented earlier, female representation tends to be concentrated in industries where women are the principle buyers. An additional argument, as mentioned previously, may be that women do not hold the adequate competence to justify board seats in all industries. Based upon the increase in females taking higher education this argument may seem unjustified (Statistics Norway). Weber (2004) suggests that businessmen vote together to control the decision making on corporate boards and therefore females do not get the chance to be represented. If this is true one may expect the female representation to be low across all industries, which seems to be the case. However, if the females instead do not hold the adequate competence we might observe large differences between industries. Again the burden of evidence is on the gender equality theory and therefore the most conservative:

H0: There is no difference in CAR between industries HA: There is a difference in CAR between industries