Empowering Women by Index Membership: Evidence from a Unique Experiment from Japan

Abstract

In 2017, the Government Pension Investment Fund of Japan, the world’s largest pension fund, adopted the MSCI Empowering Women Index (WIN). To qualify for the prestigious index, firms must meet certain criteria for the advancement of women in their workforce. Inclusion in the WIN is structured loosely as a tournament—only the top 50% firms in each sector are included. Our analysis, using a difference-in-differences methodology, shows that firms around the inclusion threshold competing for index membership display significant improvements in women’s participation in the workforce, including the C-suite, compared to firms farther away from the threshold. WIN firms also display an increase in paternity leaves suggesting a shift to a more women-friendly corporate culture. We also find that WIN firms gain institutional ownership and the change in corporate social behavior is not at the expense of operating profitability or valuation. Overall, our results document the social power of index creations.

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