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Diagnosing Discrimination: Stock Returns and CEO Gender

  • Justin Wolfers

A vast labor literature has found evidence of a %u201Cglass ceiling%u201D, 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%u2019s perception of the value of firms, taking account of the beliefs of market participants about the ability of 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11989.

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Date of creation: Jan 2006
Date of revision:
Publication status: published as Wolfers, Justin. “Diagnosing Discrimination: Stock Returns and CEO Gender.” Journal of the European Economic Association 4, 2/3 (May 2006): 531-541.
Handle: RePEc:nbr:nberwo:11989
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  1. Marianne Bertrand & Kevin Hallock, 1999. "The Gender Gap in Top Corporate Jobs," Working Papers 805, Princeton University, Department of Economics, Industrial Relations Section..
  2. Marianne Bertrand & Antoinette Schoar, 2003. "Managing With Style: The Effect Of Managers On Firm Policies," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1169-1208, November.
  3. 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.
  4. Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2001. "Corporate Governance and Equity Prices," NBER Working Papers 8449, National Bureau of Economic Research, Inc.
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