Does California's Board Gender Quota Law Put Investors At Risk?

Last October, I wrote that one academic study had concluded that California's enactment of legislation mandating minimum numbers of female directors had already "resulted in a significant decline in shareholder value for firms headquartered in California".  It should be no surprise then, that several companies have described California's law as constituting a risk to investors.  For example, one Delaware company headquartered in California included the following risk factor in its annual report on Form 10-K:

"Our ability to attract and retain qualified members of our board of directors may be impacted due to new state laws, including recently enacted gender quotas.

In September 2018, California enacted SB 826 requiring public companies headquartered in California to maintain minimum female representation on their boards of directors as follows: by the end of 2019, at least one woman on its board, by the end of 2020, public company boards with five members will be required to have at least two female directors, and public company boards with six or more members will be required to have at least three female directors. Failure to achieve designated minimum levels in a timely manner exposes such companies to costly financial penalties and reputational harm.  We cannot assure that we can recruit, attract and/or retain qualified members of the board and meet gender quotas as a result of the California law (should is [sic] not be repealed before the compliance deadlines), which may cause certain investors to divert their holdings in our stock and expose us to penalties and/or reputational harm."

Since my post last fall, another group of academics has reached similarly negative conclusions about the law's effect, finding "the introduction of the quota is associated with significantly negative announcement returns for these firms".  They also concluded "Newly appointed female directors are younger, less experienced, and less independent than incumbent and leaving directors".