Do investors value gender diversity?

How do investors react when firms reveal their gender diversity levels? We theorize that investors believe gender diversity can signal advantages (e.g., more creativity, higher competence), but that managers will under-invest in gender diversity compared to what investors think is optimal (due to a combination of managers’ preference for gender homogeneity and agency problems). Thus, investors will react more positively to announcements by firms that reveal more gender diversity than expected. In quasi-experimental event studies, we show U.S. technology and financial firms experience more positive stock price reactions if their first diversity announcements reveal relatively more diversity (e.g., if Google revealed one percentage point more gender diversity, it would gain $374.79 million in value). In an incentivized experiment, we replicate these findings and show investors’ reactions are related to their beliefs about diversity. Our approach provides the first causal field evidence supporting the business case for increasing firm-level gender diversity.