Does Diversity Help Minorities? Evidence From Sell-Side Equity Analysts
65 Pages Posted: 8 Mar 2021 Last revised: 12 Jul 2021
Date Written: July 9, 2021
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: Suggested Citation