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

Abstract

Women suffer from glass ceiling barriers to reaching CEO positions. We argue that the stock market reaction to CEO appointments constitutes a barrier that is external to the firm and that is important to understand because investors can influence appointment decisions by buying or selling stocks. We build a trading experiment to causally identify the role of preferences, and we find evidence of gender homophily among participants. When a female CEO is appointed, female participants buy stocks, while male participants sell stocks. The opposite holds when a male CEO is appointed. This behavioral trait combined with the lack of gender diversity in the stock market can explain both the negative stock market reaction to female CEO appointments and the underrepresentation of female CEOs.

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

JEL Classification: J16, M14