Do stereotypes influence our choices? Are Winning Girls aware?
Answering these questions is particularly important at a young age. Indeed, high school students’ choices today may shape career opportunities tomorrow. Are Winning Girls conscious of how stereotypes may influence their choices?
Why gender stereotypes matter?
Gender stereotypes may blur the process of information gathering. They may also contribute to self-censoring, preventing young girls to choose careers in finance. How can female young students become conscious of this?
The Global Findex database by World Bank: Data Links for Gender and Finance #2
Studying financial inclusion is important to address gender inequality in the financial realm. This post introduces The Global Findex Database, a database that measures financial inclusion.
What is financial inclusion?
Financial inclusion is the process of making formal financial services accessible and
affordable to all. It involves providing access to bank accounts for deposit and withdrawal of money, along with extension of micro-credit.
Why is it important?
Studies show that financial inclusion is pivotal to many aspects of development around the
world. It is proven to improve people’s earning potential because it leads to a more
systematic usage and saving pattern of money; it also provides the option to poor people to
expand their income by availing credit facilities. There is also a gender aspect to the increase in financial inclusion. Studies have shown improving access to formal financial services improves the wellbeing of female-headed households and increases their savings.
Where can you find data on financial inclusion?
To encourage research in the field, the World Bank has come up with The Global Findex
Database. The Global Findex Database is a collection and analysis of data conducted by the
World Bank on the borrowing, spending payments and risk management abilities of people. It has been started with support from the Bill and Melinda Gates foundation and has been calculated once in 3 years since 2011. It is primarily an indicator to analyze the extent of financial inclusion in the world with focus on the developing economies.
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How do investors react when a female CEO is appointed? Does it affect other female-led firms as well? Gender & Finance Literature Review Series #4: Dixon-Fowler, Ellestrand and Johnson (2013)
In this G&F LRS #4, we analyze the following research paper:
Dixon-Fowler HR, Ellstrand AE, Johnson JL.
2013. Strength in numbers or guilt by association? Intragroup effects of female
chief executive announcements. Strategic Management Journal 34(12):
This paper allows us to understand the impact that the appointment of a female CEO has on the performance of that particular company and on the performance of other companies with female CEOs.
Questions The paper by Dixon Fowler, Ellestrand and Johnson (SJM 2013) aims to examine three questions:
1) Try to research if firms with existing female CEOs will experience positive stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm. As a follow up to this hypothesis, they also examine if firms with existing female CEOs will experience negative stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm.
2) Examine if media reports of CEO appointment announcements are more likely to link female CEOs as an entitative group based on gender compared to male CEO counterparts.
3) Dwell on whether firms with existing female CEOs will experience negative stock market reactions when there is a succession event resulting in an announcement of a female CEO dismissal at another firm.
Sample The sample used in their study consists of 369 firms in the portfolio of appointment events and 90 firms in the portfolio of dismissal events at female-led firms, and 424 in the portfolio of appointment events for male-led firms.
Methodology To test hypotheses 1 and 3, they use an event study methodology with the CRSP (1991-2006) equally-weighted index as a proxy for market returns. They conduct a text analysis on the male and female appointments to test hypothesis 2.
Findings Their findings suggest that, firms with existing female CEOs do not experience positive stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm. To investigate about the follow up hypothesis, they find that firms with existing female CEOs experience negative stock market reactions when there is a succession event resulting in the appointment of a female CEO at another firm. In the analysis of Hypothesis 2 it was found that 55% of female CEO announcements referred to other female CEOs whereas no male CEO announcements referred to other male CEOs. Finally, for the third hypothesis they find that firms with existing female CEOs do not experience negative stock market reactions when there is a succession event resulting in an announcement of a female CEO dismissal at another firm.
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What is the cause for the gender wage gap? How can it be solved?Gender & Finance Literature Review Series #3: Goldin (2014)
In this G&F LRS #3, we analyze the following research paper:
Goldin C. 2014. A grand gender convergence: Its last chapter. American Economic Review 104(4): 1091-1119.
This paper shows that while roles of men and women are converging over time, there is a need to write a ‘last chapter’ in this convergence story. There is a decreasing but existing gender wage gap in the labor market. Goldin (2014) investigates the reasons and variations across major occupations.
Gender wage gap across occupations
The general explanation to the wage gap is that women have a lower bargaining power, will to compete and have higher chances of leaving work for family reasons. However, the author finds that the real problem is that the amount of time worked in a day or week and the amount of time out of the labor force have a direct impact on the earnings. An interesting finding by Goldin (2014) is that though gender wage gap has reduced across all age groups from their previous statuses, the total gender wage gap remains unchanged. The author tries to understand the reason for this.
Goldin (2014) conducts regression analysis on being a woman and being paid in the various sectors- Health, Business, Technology, Science and Other. Across multiple occupations, the Science and Technology exhibit the best results. It appears that this industry offers perks of working part time and provides flexibility in work hours for women with families. The author then formulates an economic hypothesis that an occupation with a linear pay (i.e. where wages are directly related to hours worked) will exhibit lower gender wage gaps. Similarly, an occupation with a non-linear pay will exhibit greater gender wage gap. She proves this hypothesis by regression and finds again that Science and Technology exhibit least gender wage gap. Goldin (2014) extends this hypothesis and analyzes this linear or non-linear earnings to time relationship and reasons for the gender wage gap in Business, Law and Pharmaceuticals.
The Last Chapter
Goldin (2014) concludes that the gender wage gap exists and varies across ages and occupations. This residual gap is because hours worked in continuity are more important in some occupations while not so in others. Flexibility has a penalty in these fields, including in Finance, leading to non-linear earnings for women. The ‘Last Chapter’ thus, must contain a work structure that has a more linear payment, greater flexibility leading to a reduced gender wage gap.
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Research shows that more than 41 percent of the female population struggle financially. What are organization doing to change this? Financial literacy is the knowledge of how to open an account, how to save better and be more financially independent in general. Are organizations promoting financial literacy for women? We gathered information pertaining to programs all over the world aimed at improving financial literacy for women.
Women’s Institute for Financial Education (WIFE) organization has a Money Club program where women meet regularly to discuss saving, budgeting, expenses, retirement planning and anything financial. Currently there are about 442 Money Clubs with 2,852 members in 46 states of USA and 7 other countries. In addition, WIFE also organizes Second Saturday workshops to impart financial information for newly divorced women.
The Financial Literacy Organization for Women and Girls (FLOW) aims to empower women and girls with financial knowledge and skills. FLOW organizes several year-round conferences, seminars, workshops and boot camps and has ties to many institutions like Federal Reserve Bank, Morgan Stanley and Credit Union. Their events help women make responsible decisions about spending, saving, borrowing, and investing for a promising future of economic well-being.
In Hong Kong, The Women’s Foundation has several financial literacy programs for marginalized women. Launched in 2011. It uses innovative methods of training to communities and through its partnerships, their initiative has seen highly positive results and won many accolades. In Philippines, the Philippine Commission on Women has published its own Gender and Financial Literacy Training Manual to better train women from all backgrounds about microfinance, financial and risk management.
The Financial Literacy Foundation by the Australian Government has done extensive research on women’s current understanding of money matters. Daughters of Tomorrow (DOT) by Financial Women’s Association, Singapore has specially tailored coursework with case studies for improving financial literacy for women.
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Are corporations promoting programs to improve the status of women employees? Research shows that for every dollar a man makes, a woman makes eighty cents. Is this gender pay gap shrinking? Various companies have started programs aimed at improving gender equality and solving the pay gap. We collected information about such programs and research work to better understand the situation.
Corporate programs in finance
Women on the Move Program by JP Morgan Chase, launched in 2013, conducts events to explore and tackle challenges faced by women. Hosting 6000 women employees in 23 cities, this program focuses on closing gender pay gap, encouraging entrepreneurship for women and empowering mothers.
Inclusion & Diversity: Women in Mckinsey holds workshops and events for its women employees, internationally. McKinsey Global Institute has conducted ground breaking research on how gender parity can affect GDP and generate $12 trillion. Mckinsey’s Women in the Workplace research, in collaboration with Leanin, has found key facts and figures indicating gender inequality at work, including underrepresentation of women in vice-president and c-suite level roles.
Other corporate programs
Getting to Equal 2017 is a study and program by Accenture with the objective to close the gender pay gap. Accenture believes encouraging women to earn a STEM degree will accelerate their career and pay by 2030.
Adobe is committed to achieve perfect gender pay parity by end of this fiscal year. In addition to organizing a Women’s Summit, Adobe is also working on improving internal hiring practices, changing unconscious biases and a digital academy to encourage women coders.
Government programs & research
Workplace Gender Equality Agency, Australian Government (WGEA) has developed a gender strategy toolkit for corporates. It includes roadmaps, scorecards, pay equity and change management strategies for companies to adopt and improve the status quo for its women employees. On achieving its goals, Australian corporates are encouraged to get cited as “Employer of Choice for Gender Equality” by WGEA.
Microfinance and entrepreneurship projects for women
Are organizations helping women from challenging backgrounds to grow financially? We gathered information pertaining to programs all over the world aimed at improving financial access for women. Microfinance is one such banking tool used to issue loans for low-income individuals. It was first started in 1983 by the Yunus Foundation in Bangladesh that organized Grameen Banks to provide Microfinance. This financial model was greatly successful. The funds from microfinance are generally aimed at financing start-up opportunities, education, insurance and investments. Here are some programs that provide access to finance for women.
Similarly, International Finance Corporation (IFC) of the World Bank group has gender programs, some specifically to promote entrepreneurship for women and improving their access to credit. IFC’s Banking on Women Program raised $1.35 billion in 34 countries in 2010. In 2014, IFC joined with Goldman Sachs “10,000 Women” program to launch Women Entrepreneurs Opportunity Facility. This program raised $600 million and expects to fund 100,000 women-owned SMEs through its financial partners.
Women’s World Banking (WWB) is another such organization that works towards financial development for women. It works with 49 financial institutions in 32 countries for the financial inclusion of 1.1 billion women. WWB conducts extensive research, develops Gender Performance Indicator and designed loans, savings accounts and micro-insurance as per its Annual Report 2016
Gender, Equality, Diversity Branch of International Labor Office (ILO GED) has various international projects for gender equality, including for microfinance. The Social Finance Programme (SFP) in cooperation with the Gates Foundation is ILO’s major microfinance project. The WEDGE team, part of ILO’s Small Enterprise (SEED) programme, also works to enhance economic opportunities for women by developing tools and strategies specifically for entrepreneurship.
Bangladesh Rural Advancement Committee (BRAC) started a Dabi loan project for women in villages of Bangladesh. Today it has 3.4 billion borrowers connected by 300 000 village organizations and also has independent operations in countries such as Myanmar, Pakistan, Uganda, Tanzania, Sierra Leone and Liberia.
Similarly, microfinancing greatly helped growth in Tunisia. This IFC project in collaboration with Tunisian microfinance institution Enda Inter-Arabe in 2012 was greatly successful.
Pro Mujer targets improving financial stability across Latin America since 1990. In its Report of 2015, Pro Mujer provided loans worth $660 million serving 250 000 female entrepreneurs.
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How risk-averse are women in finance? Gender & Finance Literature Review Series #2: Dohmen, Huffman, Falk, Sunde, Schupp and Wagner (2011)
In this G&F LRS #2, we analyze the following research paper:
Dohmen T, Huffman D, Falk A, Sunde U, Schupp J and Wagner GG. 2011. Individual risk attitudes: measurement, determinants and behavioral consequences. Journal of the European Economic Association, 9(3) 522-550.
This paper explores how risk-taking attitudes vary and factors that affect this attitude. They show the correlation of ‘the willingness to take risk’ in people with the decisions made in various sectors of their lives. Dohmen and others (2011) use data from the German Socio-Economic Panel (SOEP) surveying 22,000 individuals and compare it with the results from a lottery experiment conducted on 450 individuals.
Estimating risk attitudes
The authors ask individuals how willing they are to take risk in general on a scale from 0 to 10 and further question their willingness to take risk in the context of driving, finance, sports, health and career. Through regression analysis they see that demographics and physique of the person have an impact on the will to take risk. Dohmen and others (2011) find that women are more risk averse than men, that older members of the group are more risk averse than the younger and that having an income and wealth are positively related to risk-taking. In addition, they also find that the will to take risk is directly related to the person’s height and his or her parent’s educational background. These results are further confirmed by the regression studies on the reactions to a lottery game carried out on a smaller population.
Through another regression study on the SOEP survey, Dohmen and others (2011) compare risk attitudes in different contexts and find that people are most willing to take risk with their careers and least willing to take risk with their health and financial matters. These preferences are brought forth by the actions of these individuals in real-life scenarios. For example, a person who is self-employed, naturally has a high preference to take risk in the career forefront.
Implications for gender and risk attitudes
It is important for us to note that Dohmen and others (2011) conclude that women have a lower willingness to take risk than men. They also concretely find that people have the lowest preference to take risk in financial matters and highest for their careers. From this it can be implied that that women in finance may have chosen the field of finance with greater confidence as they are least likely to take risk in both career and finance. In addition, they are also extremely likely to calculate their decisions in the field more carefully in order to avoid high-risk situations.
Use in the Gender & Finance project
One of the aspects of the Gender & Finance project is research. This research uses experiments to better understand the behavior of individuals in terms of financial decisions. It is based on the simulation tool SimTrade, which allows one to study the reaction of participants to gender-related events. At the end of simulation, a survey is proposed to participants. One of the questions is about their risk attitude towards risk. This question uses the general question formulated by Dohmen and others (2011): How willing are you to take risk in general?
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Data gathering is essential in the analysis of any study. As a first step, we explored sources of data relevant to women working in the finance sector. Below are some links that can be used to gather key statistics about gender and finance.
Does the gender of top executives matter?Gender & Finance Literature Review Series #1: Lee and James (2007)
In this G&F LRS #1, we analyze the following research paper:
Lee PM, James EH. 2007. She-E-Os: Gender effects
and investor reactions to the announcements of top executive appointments. Strategic
Management Journal 28(3): 227-241.
This research paper shows that when representatives from a social category start taking on new roles, due to the lack of reference, these members start being perceived differently. Women in corporates are examples of this phenomenon as they only comprise 4% of top officers and thus gain a special status. These biases and stereotypes for women have a direct implication on the firm. The authors study stock market price fluctuations for firms in 1990-2000, also following the corresponding major executive announcements, CEO appointments, newspaper articles and press releases.
Hypotheses and Simulations
The authors formulated six hypotheses and ran various simulations to support them. Stock market reaction is found to be more negative on the announcement of a female CEO than on the announcement of a male CEO for companies.
Having followed various sources of public information, Lee and James (2007) also concludes that there exists a bias in the media with greater number of articles written about female CEOs than for male CEOs over their initial years in office. Moreover, simulation on the language used in these articles also indicates that media tends to emphasize on gender, gender-related topics and organizational considerations for female CEOs while being gender neutral and more organization oriented for male CEOs. A simple example would be how the word “family” shows in articles for women more often than for men. While stock market fluctuations are not as dramatic when women are promoted to higher managerial roles, it tends to be more negative when there is an announcement about the appointment of a female to the CEO position. Further analysis also brings forth that the stock market cares about the women CEO being an insider in the firm and prefers it to a women CEO being a fresh outsider.
Conclusions and Implications
As a result, the authors conclude that corporates should be more aware of the potential risks with female executive appointment and formulate a strategy to communicate this news better. More importantly, stereotypes must change and will, once more women are appointed and it isn’t a rare phenomenon anymore. It is also vital that media is more careful and unbiased in their language as they are responsible in shaping opinions and stock market reactions to a great extent. It is also interesting to explore that diversity can be broadened beyond gender and include racial and ethnic in the corporate world and may have similar stock market implications.
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