Knowledge that Transforms

We examine the effects of mandatory board gender quotas on unregulated firms that are connected to regulated ones via interlocking directorates. After the introduction of quotas, connected firms significantly increase their share of female directors relative to similar unconnected firms. The spillover effects are substantial — at least as large as the direct effects on regulated firms, challenging previous claims that quotas have no broader impact on women in business. Our results suggest that quotas indirectly broaden the supply of candidates for connected firms, along dimensions that include, but are not limited to, gender.

We study how U.S. dollar fluctuations transmit through domestic supply chains in emerging markets. Large firms borrow in foreign currency and extend trade credit to domestic partners, exposing the supply chain to exchange rate risk. We develop a model where financially constrained suppliers pass through shocks to buyers, while unconstrained firms absorb them. Using quarterly firm-level data from 19 emerging markets, we provide empirical evidence consistent with the model’s predictions. We find that even highly exposed firms reduce trade credit only modestly following a depreciation, while accepting large profit losses, suggesting that firm-to-firm credit relationships partially shield downstream firms from financial shocks.