Does Diversity Help Minorities? Evidence From Sell-Side Equity Analysts

65 Pages Posted: 8 Mar 2021 Last revised: 12 Jul 2021

See all articles by Paul Borochin

Paul Borochin

University of Miami - Department of Finance

Vidhi Chhaochharia

University of Miami - Department of Finance

Alok Kumar

University of Miami - Miami Herbert Business School

Date Written: July 9, 2021

Abstract

Using the economic setting of sell-side equity analysts, we demonstrate that racial/ethnic diversity does not always help minority groups. Race/ethnicity of analysts influences their forecasting style and accuracy, where these accuracy differences primarily reflect the effects of brokerage diversity. Surprisingly, the accuracy of minority analysts is adversely affected by brokerage diversity while White analysts benefit from higher brokerage diversity. The career outcomes of analysts are affected by brokerage diversity but stock market participants do not perceive diversity-based accuracy differences accurately. Collectively, these results suggest that potential benefits of racial/ethnic diversity may be reduced by within-group competition.

Keywords: Diversity, racial/ethnic minorities, sell-side analysts, earnings forecasts, forecast accuracy, market reaction.

JEL Classification: G20, G24, J71

Suggested Citation

Borochin, Paul and Chhaochharia, Vidhi and Kumar, Alok, Does Diversity Help Minorities? Evidence From Sell-Side Equity Analysts (July 9, 2021). Available at SSRN: https://ssrn.com/abstract=3772503 or http://dx.doi.org/10.2139/ssrn.3772503

Paul Borochin (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Vidhi Chhaochharia

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Alok Kumar

University of Miami - Miami Herbert Business School ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

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