Investors’ Response to the #MeToo Movement: Does Corporate Culture Matter?

This paper provides evidence that the #MeToo movement revised investors’ beliefs about the cost of fostering a culture that excludes women, as reflected by the absence of women directors in the board room. In particular, we document an overall negative market reaction tracking the timeline of events associated with the #MeToo movement, beginning with the Harvey Weinstein expose in October of 2017 in the New York Times. This negative response concentrates in firms that have traditionally excluded women from their boards. In contrast, for companies that embrace the inclusion of women on their boards, this negative effect is moderated. Overall, investors appear to have revised their beliefs about the risks associated with future revelations of misconduct, and also about the value of having women in the board room shaping the culture of the firm.