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Diagnosing Discrimination: Stock Returns and CEO Gender

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  • Wolfers, Justin

Abstract

A vast labour literature has found evidence of a 'glass ceiling', whereby women are under-represented among senior management. A key question remains the extent to which this reflects unobserved differences in productivity, preferences, prejudice, or systematically biased beliefs about the ability of female managers. Disentangling these theories would require data on productivity, on the preferences of those who interact with managers, and on perceptions of productivity. Financial markets provide continuous measures of the market’s perception of the value of firms, taking account of the beliefs of market participants about the ability of the men and women in senior management. As such, financial data hold the promise of potentially providing insight into the presence of mistake-based discrimination. Specifically if female-headed firms were systematically under-estimated, this would suggest that female-headed firms would outperform expectations, yielding excess returns. Examining data on S&P 1500 firms over the period 1992-2004 I find no systematic differences in returns to holding stock in female-headed firms, although this result reflects the weak statistical power of our test, rather than a strong inference that financial markets either do or do not under-estimate female CEOs.

Suggested Citation

  • Wolfers, Justin, 2006. "Diagnosing Discrimination: Stock Returns and CEO Gender," CEPR Discussion Papers 5507, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5507
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    References listed on IDEAS

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    1. Marianne Bertrand & Kevin F. Hallock, 2001. "The Gender Gap in Top Corporate Jobs," ILR Review, Cornell University, ILR School, vol. 55(1), pages 3-21, October.
    2. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 107-156.
    3. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1169-1208.
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    More about this item

    Keywords

    CEO pay; CEOs; chief executive officer; discrimination; event study; excess returns; female CEOs; statistical discrimination;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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