Regulation and the trickle-down effect of women in leadership roles

We use an event study design to provide evidence demonstrating how the trickle-down effect is influenced by the introduction of regulation on board gender diversity. In 2011, a new regulation was suddenly introduced for firms listed on the United Kingdom's FTSE 350 index, the regulatory intervention put forward recommendations to increase the representation of women on the boards of FTSE 350 listed firms - the most critical recommendation was a voluntary target of having twenty-five percent of board positions held by women. We argue this change in regulation represents an exogenous shock, we utilize this shock to investigate how regulation influences the trickle-down of women's representation from board level to senior management. We find evidence of a positive relationship between women on boards and women's representation in senior management during the pre-regulation era - otherwise referred to as the trickle-down effect. However, the introduction of regulation had the unintended consequence of weakening the relationship between women on boards and women in senior management. Our results suggest that the trickle-down effect varies between different contexts and settings. We discuss the implications for research and practice.