The Importance of Signaling for Women's Careers
75 Pages Posted: 20 Dec 2021 Last revised: 26 May 2023
Date Written: December 17, 2021
Abstract
We show that signals of leadership qualification are more important for women's career advancement than for men's. Specifically, signals of higher education, professional experience and access to professional networks increase male directors' probability to enter a leadership position by 5.2%, and their compensation by 5.7% ($246,900). Female directors with these signals are 11.0% more likely to enter a leadership position, and their compensation is 19.7% ($796,800) higher. This result is in line with models of screening discrimination, in which women need to provide more observable skill signals to counterbalance higher uncertainty about their unobservable qualifications for a leadership position. Supporting this channel, we find that our results are stronger if information asymmetries between (mostly) male employers and female candidates are larger: successions after the sudden death of a CEO, successions in firms with all-male nomination committees, and outside hires.
Keywords: Signaling, Gender differences, Leadership, Executive Compensation
JEL Classification: A14, G34, G35, J16, J31
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