Is Gender in the Pocket of Investors? Identifying Gender Bias Towards CEOs with a Lab Experiment

Abstract

Do investors react negatively to the appointment of female CEOs because of their gender bias? To answer this question, we build a trading experiment to causally identify gender bias towards newly appointed CEOs. We distinguish among gender stereotypes, double standard and group biases (in-group favoritism and out-group discrimination) as theoretical sources of gender bias. When a female CEO is appointed, we find that female participants buy stocks while male participants sell stocks. The opposite holds when a male CEO is appointed. For male traders, our results are consistent with both stereotypes and group biases. For female traders, our results are consistent with both double standard and group biases. These sources of gender bias, combined with the lack of gender diversity in the stock market, can explain the negative stock market reaction to female CEO appointments documented in archival work, and contribute to the pervasive underrepresentation of female CEOs around the world.

Keywords: CEO, gender diversity, gender homophily, glass ceiling, stock market

JEL Classification: J16, M14