Female Employees and Implied Cost of Equity Capital : Focusing on Korean Affirmative Action in 2006

[Purpose]This study empirically examined the effect of the female workforce on firms’ implied cost of equity capital after implementing Korean affirmative action (Equal Employment Act) in 2006. [Methodology]Using samples publicly listed firms between 2002 and 2019, this paper conducted an empirical analysis to investigate the influence of the female workforce on the cost of equity capital for firms listed in the Korean Stock Exchange. [Findings]The result indicates that the more the female employees in a firm, the lower the cost of equity capital, especially after implementing affirmative action in 2006. This means implementing affirmative action in 2006 might be the crucial factor for the market participants positively evaluate high female workforce. [Implications]As the first study to verify the effect of the female workforce on the cost of equity capital of firms, the results can provide incentives for corporate managers to more strategically hire and nurture female employees after the implementation of affirmative action in 2006. In addition, the results support the positive effects of government policies on promoting women's employment and provide implications for capital market participants evaluating companies that are active in women's employment.