What is the cause for the gender wage gap? How can it be solved?

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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Financial literacy projects for women

Financial literacy projects for women

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.

Worldwide projects

The Organisation for Economic Co-operation and Development (OECD) has published its findings about Women and Financial Education post the G20 summit in 2012. They have also made several literature reviews and analyzed barriers to women’s financial empowerment through lack of financial literacy.

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.

National projects


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.

The Financial Women’s Association (FWA) organizes educational workshops for women and also has mentoring and scholarship programs for women since 2001. Women’s Institute for a Secure Retirement (WISER) too has workshops, training and provides materials to educate women of all ages about financial aspects. The Lisa Initiative and the Womanspace has similar programs for financial literacy for women.

Asia and other countries

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.

Hope this help! Please do not hesitate to contact us for more information or leave comments.

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Corporate programs for women and gender pay gap

Corporate programs for women and gender pay gap

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.

Institute for Women’s Policy Research states that gender pay gap will not be solved for at least another 43 years. While it encourages women to enter STEM field of studies, it has also made specific findings that in the finance industry, female advisors comprise merely 54% of the male advisers.

Hope these are useful! Please do not hesitate to contact us for more information or leave comments.

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Microfinance and entrepreneurship projects for women

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.

World wide projects

The Women Entrepreneurs Finance Initiative (We-Fi) is a Financial Intermediary Fund (FIF) of the World Bank. Launched in October 2017 at the G20 Summit, the program has already raised $340 million. It aims to fill the existing $300 billion annual credit gap 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.

National projects

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.

Hope these help! Please do not hesitate to contact us for more information or leave comments.

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How risk-averse are women in finance?

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 links for gender and finance

Data links for gender and finance

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.

  1. The Organisation for Economic Co-operation and Development (OECD)

  1. United States Department of Labor (DOL)

  1. European Institute of Gender Equality (EIGE)

  1. World Bank- Gender Statistics

Do not hesitate to contact us for more information or comment in the comment sections. We would also appreciate any more data links and will research further for such sources of data.

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Does the gender of top executives matter?

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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Literature review Lee James 2007
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CEO appointment, gender and trading behavior

CEO Appointment, Gender and Trading Behavior: Evidence from Lab Experimental Simulations

Estefania Santacreu-Vasut ESSEC Business School

Prof. François Longin ESSEC Business School

We present below our latest research in Gender & Finance focusing on CEO appointment, gender and trading behavior.

CEO gender and market reaction

How do investors react to a new CEO’s gender when the firm announces his/her appointment? To answer this question, we build an experiment that allows us to study gender stereotypes in financial markets, which is one of the most male-dominated industries. This issue is important for society because a lack of female representation in leadership positions may result in higher gender inequality, inefficient talent allocation and lower economic growth.

In this paper, we extend the existing literature by adopting a two-sided approach to the gender dimension: we study both CEO and investor gender. Using experimental simulations in a controlled environment, we disaggregate the market reaction following the CEO appointment according to CEO and investor gender. On the CEO side, an experimental approach allows us to balance the proportion of male/female CEOs, which solves the statistical problems of previous studies (due to too few female CEOs in existing firms). On the investor side, it allows us to balance the proportion of male/female participants.

Research based on experimental simulations

To carry out our research, we use an on-line trading simulation platform called SimTrade. We build a trading simulation where participants trade their portfolio (cash and stocks) on a particular company and react to the news flow, which is a series of events about the company, its sector and the economy. We introduce a gender-related event: the announcement of the next CEO, either a man or a woman. By randomizing the CEO gender at the launch of the simulation, we can identify the trading reactions of participants following the CEO announcement according to his/her gender. Participants’ trading decisions to buy or sell stocks signals their beliefs or expectations regarding the new CEO’s impact on future firm performance.

The experiment was carried out in ESSEC research lab, a facility designed for conducting experiments in a controlled environment. Participants in the experiment were recruited from the Financial Management course at ESSEC Business School.

CEO nomination ESSEC experimental lab
Participants in ESSEC experimental lab

Research based on experimental simulations

We find that when a female CEO is appointed, female participants perceive this event as good news as they tend to buy stocks, while male participants perceive it as bad news as they tend to sell stocks. The opposite behavior is observed when a male CEO is appointed: female participants perceive this event as bad news as they tend to sell stocks, while male participants perceive it as good news as they tend to buy stocks. Overall, these results show that investors’ reactions to CEO gender may depend on their own gender. We interpret this finding as gender homophily, a sociological concept meaning that individuals prefer to interact with individuals of their own type.

Trading behavior after the announcement of the next CEO

You can download the PowerPoint presentation and research article below.

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Studying attention in financial markets

Studying attention in financial markets

Jose Benedicto Duhaylongsod ESSEC Business School

With the growing prominence of behavioral research in business, social sciences, and management, ESSEC has built a Data Lab, a facility designed to conduct experiments in a controlled environment. More recently, ESSEC has invested in advanced behavioral research technology, particularly, the eye-tracking (Tobii Pro Studio), facial recognition (FaceReader™) and observational/behavioral analysis (The Observer® XT) software. Although already established in marketing, the use of these technologies in other fields like management, economics, operations management, and finance opens up a plethora of research opportunities.

With my recent involvement at the ESSEC Research Center, I was fortunate enough to have some first-hand experience with organizing experiments using the software mentioned above, among other things. As a Ph.D. student that does behavioral studies and a researcher in the nascent stage of his career, my exposure to a wide range of research methodologies and practices has enriched my current Ph.D. experience.

With Prof. François Longin (Finance Department) and Prof. Santacreu-Vasut (Economics Department), I organized a series of experiments to study the attention of traders in financial markets. We use the simulation tool called SimTrade in order to see where traders focus their attention when they make their financial decisions. Although economic models assume that individuals are rational and process information in the most efficient way to make their decisions, this is certainly not the case in the real world. See the article “Limited Attention” by Sonya S. Lim and Siew Hong Teoh in “Behavioral Finance: Investors, Corporations, and Markets” Wiley Handbook edited by Kent H. Baker and John R. Nofsinger.

Eye tracking

Tobii Pro Studio is the on-screen based software that creates and handles eye-tracking studies. With this software, a researcher can analyze gaze plots and movements on a screen plus generate in-depth qualitative analyses given certain stimuli (such as an image, a video or a website). The researcher can gather information on how long or how intently the subject stares a particular part of the screen or which part of the screen first grabs his/her attention. The program starts off with the calibration of the subject’s eye gaze to fully capture its movements on the screen. Similar to the previous software, you can export the aggregate data into tables/charts/diagrams or a more detailed dataset.

Facial recognition

FaceReader™ is one of the software offered by the Noldus Information Technology that handles facial expression and recognition analyses. With this software, a researcher can analyze particular behavioral and facial responses of individuals like basic facial expressions, gaze direction, head orientation, etc. to certain stimuli (such as an image, a video or a website). At first, the software records a video of the subject’s face, while he/she is exposed to a particular stimulus. After the experiment, the researcher can have either have an overview of the particular facial expressions the subject expressed or a more detailed account of the changes in expression over time. The data can be exported into summary tables, colorful tables/charts/diagrams or raw dataset for further statistical analyses.

Design of an experiment

The primary purpose of these software programs is to enrich the analysis of behavioral experiments by focusing on other behavioral cues (like eye movement and facial expression) that cannot be captured by the traditional tools like questionnaires or outcomes for a particular task. In designing research or generating the research questions, it would be best to have these particular tools in mind. The researcher can then identify the relevant independent and dependent variables he/she would like to study. From there, he/she can fully design the experiment regarding the treatments and measures he/she could like to gather and encode them on the respective programs. At ESSEC, the Behavioral Research Laboratory assists in the conducting of the experiment, from recruitment of subjects to actual execution of the experiment.

Attention in financial markets: some preliminary results

With the eye-tracking tool, we studied where traders focus their attention when they make their financial decisions on the SimTrade simulation platform.

ESSEC Business School
Heat map from the eye tracking experiment

The heat map obtained with the eye-tracking tool shows where the participant pays attention during a trading simulation. By decreasing order, he/she pays attention to:

  • The evolution of the stock price
  • The ticker tape with the news
  • The gain/loss during the simulation
  • The data of latest transactions
  • The market given by the limit order book

Jose Benedicto Duhaylongsod
PhD candidate at ESSEC Business School

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Follow the Gender & Finance project on social networks

Follow the Gender & Finance project on social networks

Estefania Santacreu-Vasut ESSEC Business School

Prof. François Longin

For the project Gender & Finance, we defined the mission statement as “unblinding gender in finance: from the classroom to the trading floor”.

In other words, we think that taking into account the “gender” dimension, both in the academic world and in the business world, can bring value for society.

Follow the Gender & Finance project on social networks:

@GenderFinance Prof. Santacreu-Vasut Prof. Francois Longin
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