Reputation Affects Women’s Promotion, Earnings

Lily Fang

Lily Fang

Men gain greater reputation and job performance benefits from professional connections than women with equivalent education and job skills, according to INSEAD’s Lily Fang and Sterling Huang of Singapore Management University,

Sterling Huang

Sterling Huang

In fact, among the U.S. Wall Street analysts, many women had superior educational qualifications: Thirty-five percent these women earned degrees from Ivy League universities, in contrast to 25 percent of men from the same prestigious universities.

Lauren Cohen

Lauren Cohen

Fang and Huang examined analysts’ alumni connections with senior officers or board members of up to eight companies, using an approach pioneered by Harvard’s Lauren Cohen, and Christopher Malloy with Andrea Frazzini, of AQR Capital Management.

Christopher Malloy

Christopher Malloy

They considered analysts’:

  • Year-end earnings per share (EPS) forecasts,
  • Buy/sell stock recommendations from 1993 to 2009,
  • Price impact of their recommendations,
  • Selection to “All America Research Team” (AA) by Institutional Investor magazine during the same period.
Andrea Frazzini

Andrea Frazzini

The coveted AA recognition is based on the institutional investors’ subjective evaluation of each analyst’s industry knowledge, communication, responsiveness, written reports, and related skills.

Surprisingly, forecast accuracy is one of the least important selection criteria, so skillful analysts may be overlooked as an “All America” member if they are not visible and well-regarded by decision-makers.

Connections directly contributed to male analysts’ likelihood of being named to the  “All America Research Team” (AA).
In contrast, professional connections were unrelated to female analysts’ probability of selection as AA, suggesting that investors subjectively value connections among male analysts but not among female analysts.
These reputational decisions have significant financial consequences for analysts because those awarded the AA title earn around three times more than those without it.

About 25% of women and men analysts shared a school tie with a senior officer or board member in the firms they cover, but these connections improved men’s forecast accuracy significantly more than women’s estimate correctness.
These connections also improved the impact of male analysts’ stock recommendations, measured by market reaction to their buy and sell calls.

Female analysts with a connection to a female executive at firms they covered had a highly significant improvement in accuracy ranking, yet male analysts with male connection experienced almost twice as much accuracy improvement.

Herminia Ibarra

Herminia Ibarra

This significantly different impact of similar connections early in women’s and men’s careers could explain gender gaps that exist throughout long-term career trajectories.
This finding supports Herminia Ibarra’s similar results for men and women in an advertising firm, where men capitalized on network ties to improve their positions with employers.

Women capable of executive roles at these Wall Street firms may remain in analytical roles because promotion to General Manager roles depend on subjective evaluations by current decision makers, who are usually men.

The “Old Boys Club” remains a powerful advantage for men even though female analysts are equally represented in the AA analyst pool.
Fang and Huang concluded that despite mandated protections against gender discrimination in the U.S, men and women may be evaluated using different subjective criteria, even with the benefit of social connections.
This leads to differential career advancement for women and men.

Ronald Burt

Ronald Burt

These career-related social connections, or social capital, are affected by legitimacy, reputation, and network structures, argued University of Chicago’s Ronald Burt.
He noted that “holes” in a social network are entrepreneurial opportunities to add value, and women should have equal opportunities to fill network holes and increase their possibility of advancement.

However, Burt noted that “entrepreneurial networks linked to early promotion for senior men do not work for women” because women are not accepted as legitimate members of the population of highly promotable candidates.

He explained that women and minorities who succeed despite this disadvantage gain access to social capital by leveraging the network of a legitimate strategic partners.
This economic analysis may explain the powerful advantage of sponsors for women and minorities in the workplace.

-How do you identify and fill “structural holes in social capital networks”?


©Kathryn Welds


One thought on “Reputation Affects Women’s Promotion, Earnings

  1. kathrynwelds Post author

    Sandy Yu wrote:

    Interesting article. What are some other examples of “network of a legitimate strategic partner” besides sponsors?

    Kathryn Welds replied:

    Thanks for your comment and question, Sandy.
    Ronald Burt’s entertainingly-written analysis of The Gender of Social Capital suggests that women can gain access to other people’s networks by providing information and by connecting people across network “holes.”
    When others have power and credibility, access to their networks can provide entrees to opportunities and connections, even when the network owners do not serve as formal sponsors or advocates.
    Access to their networks (“borrowed social capital”) provides tacit validation and reputational benefits almost as powerful as sponsors.
    Burt’s study indicates that women who “borrow social capital” are more likely to gain promotions earlier than expected.


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