Is the Stock Market Biased Against Diverse Top Management Teams?

71 Pages Posted: 12 Feb 2019 Last revised: 6 May 2020

See all articles by Alberto Manconi

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Antonino Emanuele Rizzo

Nova School of Business and Economics

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: February 1, 2019

Abstract

Using a novel text-based measure of top management team diversity, covering over 70,000 top executives in over 6,500 U.S. firms from 1999 to 2014, we show that analyst forecasts are systematically more pessimistic for firms with more diverse top management teams ("diverse firms"), especially for inexperienced analysts. Institutional investors, especially if located in conservative areas, are less likely to hold diverse firms, even though diverse firms do not exhibit inferior returns. Consistent with downward-biased expectations, abnormal returns on information-release days are systematically positive for diverse firms. Combined, our results suggest stock markets are biased against diversity in top management teams.

Keywords: Biased Expectations, Top Management Teams, Diversity

JEL Classification: G32, G34, M14

Suggested Citation

Manconi, Alberto and Rizzo, Antonino Emanuele and Spalt, Oliver G., Is the Stock Market Biased Against Diverse Top Management Teams? (February 1, 2019). European Corporate Governance Institute – Finance Working Paper No. 616/2019, Available at SSRN: https://ssrn.com/abstract=3327266 or http://dx.doi.org/10.2139/ssrn.3327266

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Oliver G. Spalt (Contact Author)

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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