Gender & Finance Literature Review Series #7: Adams, Kräussl, Navone and Verwijmeren (2017)

In this G&F LRS #7, we analyze the following research paper:

Adams RB, Kräussl R, Navone MA, Verwijmeren P. 2017. Is gender in the eye of the beholder? Identifying cultural attitudes with art auction prices. Working paper. Goethe University.

This paper allows us to understand the gender bias in art auction prices. Adams et al. (2017) concentrate only on the demand side of the problem i.e. they look at pricing of art in auction houses. They assume that there is no problem with the supply of art by female artists.

What is the methodology used by the authors?

The authors used two experiments to draw inferences on the relationship between gender of the artist and prices of the paintings. The first experiment included asking the population to guess the gender of the artist by observing a pre-decided list of paintings. The participants also had to provide a number that they would bid foreach of the paintings. This experiment helped the authors to analyze two aspects. Firstly, it helped them to analyze whether it is obvious that a piece of art is made by a female artist i.e. does female made art have observable similarities in themes or styles. Secondly, it helped them the analyze the impact of perceived gender of the artist (by the participants) on the prices bid for the paintings. Under the second experiment, each of the participants was asked to rate a list of 10 paintings, but the difference being that this time they could see the names of the artists (and hence recognise the gender of the artists before making a bid). This helped the authors analyze if there are any biases towards prices bid for paintings of female artists.

What are the results obtained by them?

From the first experiment, the authors inferred that the participants (people who were frequenting art galleries and auction houses) guessed majority of the paintings to be made by male artists. With regards to the bid prices for the paintings, it was inferred that the participants, who mainly comprised of affluent males frequenting art auction houses, did not appreciate female art as much as they did for paintings made by males (as was obvious from their low bids for female made art). For the second experiment, the authors found that the respondents perceived female made paintings to be of a lower quality, which was evident from the lower score given to female made art.

What do we recommend?

Firstly, it may be a useful technique to hide gender related characteristics, so as to avoid bias based on whether the person is male or female. Moreover, there is an issue of wrong valuation of the particular products because they are based on gender stereotypes. For example, investors might be biased against the stocks of a company because it has a woman CEO, art collectors might under-value a painting because it has been made by a female artist etc. Hence there should be mechanisms to mitigate this problem as well.

Slides

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Gender & Finance Literature Review Series #6: Adams and Ragunathan (2015)

In this G&F LRS #6, we analyze the following research paper:

Adams RB, Ragunathan V. 2017. Lehman sisters. Working paper. University of South Wales.

This paper allows us to understand if women are systematically more risk-averse than men. Adams and Ragunathan (2015) concentrate on a specific industry i.e. the finance industry with a focus on banking. They study in detail to check if the presence of women as top executives, led the banks to perform better during the times of crises.

What is the methodology used by the authors?

The authors consider origin risk (risks measured on the date that banks first appear in CSRP) as an exogenous measure for banks to see if boardroom diversity responds to changes in risk (based on Cheng, Hong and Scheinkman, 2015). Secondly, they account for gender diversity in the risk regressions using a Blau index of gender balance in director connections. In order to analyze whether more gender diverse boards have different responses which help to improve their performance, they consider the research done by Adams and Ferreira (2009). Thirdly, they try to find out if there is a difference between women who choose a career in finance and others who do not, especially with reference to the risk-taking capabilities of these women. In order to analyze this further, they draw upon the research done by Sapienza, Zingales and Maestripieri (2009). The research considers the entire cohort of MBA students at the University of Chicago (including men). They run test on the responses of the sample to check if women have more risk-taking abilities than men. Finally, they try to analyze the participation of women as board members in financial firms in comparison with non-financial firms. They do this by drawing upon the research done by Adams and Kirchmaier (2015b).

What are the results obtained by them?

They find that there is no conclusive evidence suggesting that boardroom gender diversity is associated with more risk-taking capabilities, especially in the event of a crisis. Secondly,
male directors are more punctual and there is less absenteeism on their side when there are more women directors in the board. Thirdly, in the cohort of MBA students, women are more risk-averse than men. Women who opt for a career in finance have lower risk-aversion than other women who opt for careers in other industries. Whereas, this is not the case for the male students. And finally, they found that fewer women were on the boards of financial firms as compared to industrial firms.

Slides

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Are there any differences in the risk taking abilities of males and females? Does culture have an impact on these stereotypes?

Gender & Finance Literature Review Series #5: Pondorfer, Barsbai and Schmidt (2016)

In this G&F LRS #5, we analyze the following research paper:

Pondorfer A, Barsbai T, Schmidt U. 2017 “Gender Differences in Stereotypes of Risk Preferences: Experimental Evidence from a Matrilineal and a Patrilineal Society” Management Science, 63(10) 3147-3529.

This paper allows us to understand the impact of cultural differences on the stereotypes of risk taking abilities between the two genders. Pondorfer, Barsbai and Schmidt (2017) examine stereotypes based on gender risk taking ability while taking samples from two non-traditional societies, the patrilineal Palawan in the Philippines and the matrilineal Teop in Papua New Guinea. They are also interested in finding culture specific reasons for stereotypes based on gender.

Why compare these two societies?

Both the societies had similar occupational patterns with farming being the primary industry and fishing or animal husbandry being the secondary one. The major difference was that the Teop society is matrilineal in nature, which means that the line of descent goes through the daughter and not the son. This means that women have rights over resources unlike the Palawan society where men had these rights.

How was the experiment conducted?

The sample population is asked to choose from a series of 50/50 gambles. Each of the 5 gambles have a certain payoff and another payoff based on a particular probability. The other payoff keeps increasing in expected payoff and risk as is evident from an increasing standard deviation. Each person is asked to pick a gamble for himself/herself on which they would pay real money. Secondly, each person is asked to guess that which gamble would be chosen by a male and a female member from their particular society. This would help to know the stereotype that is prevalent about the genders’ risk preferences in the particular society. In totality 103 people from the Palawan society and 96 people from the Teop society were asked to do this experiment.

What did the authors infer?

It was found that, irrespective of the gender criterion, Palawan members were less risk averse than Teop members. While 55% of the Palawan sample chose risky games, only 33% of the Teop sample did so. There were no observable differences in gender risk preferences across both societies. The entire Palawan sample makes higher predictions about the other peoples’ gamble choices than the Teop samples. This result is seen to be true disregarding the gender criterion. Men from Palawan (patrilineal society) underestimate womens’ risk taking ability. On the contrary, men from matrilineal Teop overestimate womens’ risk taking ability. Women from both societies have almost accurate    estimations of risk for the men in the society. Both men and women in both societies predict their own gender’s risk taking ability very accurately. Pondorfer, Barsbai and Schmidt conclude that gender is not a major determinant of risk preferences. On the contrary, ‘nurture’ or the cultural environment in which the people live plays a very important role in the perception of risk taking ability.

Slides

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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): 1488–1501.

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.

Slides

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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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