Gender quota laws and intra-group governance: Evidence from parent-subsidiary dynamics

Abstract Gender quota laws apply to parent firms but typically do not extend to their subsidiaries, raising the question of whether legally induced changes in board composition are associated with changes within corporate groups. Drawing on institutional theory and sensemaking theory, this study examines whether gender quota laws targeting parent firms are associated with a greater presence of women directors in their subsidiaries and identifies which parent- and subsidiary-level characteristics foster gender balance on subsidiary boards. To this end, we employ propensity score matching, fractional logit regression, and hierarchical logit regression on a sample of Italian firms. The results show that the presence of women directors in subsidiaries of parent firms directly subject to the gender quota law is lower than in firms that are neither directly nor indirectly subject. Consistently, being a subsidiary of a regulated parent firm is associated with a lower presence of women directors, even after accounting for observable firm characteristics and regardless of the parent firm’s shareholding. A larger subsidiary’s board size, greater subsidiary age, being an innovative subsidiary, and a higher proportion of women directors in the parent firm (including the presence of a critical mass) are positively associated with a higher percentage of women directors in the subsidiary. By contrast, having a multinational parent firm is negatively associated with the presence of women directors. Overall, the findings suggest that regulatory pressure at the parent-firm level does not automatically translate into similar governance outcomes within subsidiaries and may be consistent with limited or even negative intra-group diffusion, although the evidence refers to a single-year cross-section and may not capture longer-term adjustment processes.