Abstract

This study examines whether and how board gender diversity can affect corporate wage inequity by drawing on diversity theory and gender socialization and ethicality theories. Building on an exogenous relaxation of China’s one-child policy (OCP) in 2013, which led to a substantial decline in the female labor force participation rate. Our empirical analysis suggests that board gender diversity is negatively associated with corporate wage inequity. This result is robust to various endogeneity and sensitivity analyses. We find that the OCP relaxation only increases average executive pay; it does not affect employee pay. One potential mechanism driving our results is that the decline in board gender diversity caused by the OCP relaxation reduces supervision, restriction, and fairness within the firm, which increases executives’ pursuit of personal interests and ultimately leads to the rise of wage inequity. Our findings are particularly significant for firms in capital-intensive industries, firms with a low level of employee bargaining power, and large firms.