Does the Stock Market Gender Stereotype Corporate Boards? Evidence from the Market's Reaction to Directors' Trades

17 Pages Posted: 2 May 2013

See all articles by Alan Gregory

Alan Gregory

University of Exeter - Xfi Centre; University of Exeter Business School

Emma L. Jeanes

University of Exeter

Rajesh Tharyan

University of Exeter; University of Exeter Business School

Ian Tonks

University of Bristol

Date Written: June 2013

Abstract

Attitudes towards male and female managers within organizations are well documented, but how the stock market perceives their relative capabilities is less studied. Recent evidence documents a negative short‐run market reaction to the appointment of female chief executive officers and suggests that female executives are less informed than their male counterparts about future corporate performance. These results appear to dispute the stock market value of having women on corporate boards. However, such short‐run market reactions may retain a ‘gender bias’, reflecting the prevalence of negative stereotypes, where the market reacts to ‘beliefs’ rather than ‘performance’. This study tests for such bias by examining the stock market reaction to directors' trades in their own companies' shares, by measuring both the short‐run and longer‐term returns after the directors' trades. Allowing for firm and trade effects, some evidence is found that, in the longer term, markets recognize that female executives' trades are informative about future corporate performance, although initially markets underestimate these effects. This has important implications for research that has attempted to assess the value of board diversity by examining only short‐run stock market responses.

Suggested Citation

Gregory, Alan and Jeanes, Emma and Tharyan, Rajesh and Tonks, Ian, Does the Stock Market Gender Stereotype Corporate Boards? Evidence from the Market's Reaction to Directors' Trades (June 2013). British Journal of Management, Vol. 24, Issue 2, pp. 174-190, 2013, Available at SSRN: https://ssrn.com/abstract=2259440 or http://dx.doi.org/10.1111/j.1467-8551.2011.00795.x

Alan Gregory

University of Exeter - Xfi Centre ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

University of Exeter Business School ( email )

Streatham Court
Xfi Building Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Emma Jeanes

University of Exeter ( email )

Streatham Court, Room 108
Exeter EX4 4QX, Devon
United Kingdom
(01392) 264518 (Phone)
(01392) 263242 (Fax)

Rajesh Tharyan

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

University of Exeter Business School ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 4ST
United Kingdom
01392262544 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/about/whoswho/index.php?web_id=Rajesh_Tharyan

Ian Tonks

University of Bristol ( email )

Department of Finance and Accounting
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

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