Female Equity Analysts and Corporate Environmental and Social Performance *

Abstract

This paper investigates the impact of female analyst coverage on firms’ environmental and social (E&S) performance. Exploiting broker closures as a quasi-exogenous shock to female analyst coverage, we show that firms experiencing an exogenous drop in female analyst coverage subsequently suffer a 7% decline in E&S scores and a deterioration in real E&S outcomes. To uncover the mechanisms, we develop novel machine learning models to analyze a large corpus of over 2.4 million analyst reports and 120,000 earnings call transcripts. Our analysis reveals that female analysts are more likely to discuss E&S issues in their research reports and during earnings conference calls compared to their male counterparts. Moreover, female analysts are more likely to take actionable steps, such as downgrading stock recommendations and lowering target prices, following negative E&S discussions in their reports. By tracing the path from analyst gender to differences in behaviour and ultimately to covered firms’ E&S performance, we find evidence that gender diversity among analysts is a key driver of corporate E&S practices. Our findings highlight the importance of promoting gender diversity in the finance industry and offer novel insights into the role of female analysts in shaping corporate E&S practices.

Keywords: female equity analysts, analyst monitoring, corporate environmental and social performance, corporate governance, FinBERT, analyst reports, earnings conference calls JEL classification: G24, G30, G40 female equity analysts, analyst monitoring, corporate environmental and social performance, corporate governance, FinBERT, analyst reports, earnings conference calls JEL classification: G24, G30, G40

JEL Classification: G24; G30; G40:C45; C55