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Reputation Affects Women’s Promotion, Earnings

Lily Fang

Lily Fang

Sterling Huang

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

Lauren Cohen

Lauren Cohen

Fang and Huang examined U.S. equity analysts’ alumni connections with company senior officers and board members, using an approach pioneered by Harvard’s Lauren Cohen, and Christopher Malloy with Andrea Frazzini, of AQR Capital Management.

Christopher Malloy

They considered analysts’:

  • Year-end earnings per share (EPS) forecasts,
  • Buy-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.
    Selection to AA is based on the institutional investors’ subjective evaluation of each analyst’s industry knowledge, communication, responsiveness, and written reports.
Andrea Frazzini

Andrea Frazzini

Forecast accuracy is one of the least important selection criteria.
Therefore, skillful analysts may be not be selected 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).
This relationship did not hold for female analysts, and this difference leads to significant financial consequences for male and female analysts:  AA team members earned three times more than non-team analysts.

About 25% of all analysts shared a school tie with a senior officer or board member in the firms they cover, and these connections improved men’s forecast accuracy significantly more than women’s.
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 covered firms significantly improved their ranking accuracy, yet male analysts with a male connection improved their ranking accuracy almost twice as much.

Herminia Ibarra

Herminia IbarraThis different impact of similar connections early in women’s and men’s careers could explain gender gaps that exist throughout career trajectories.

Herminia Ibarra’s similar results for men and women in an advertising firm demonstrated that men capitalized on network ties to improve their employment positions.

Women may remain in analytical roles even if they are capable of executive roles because promotion to General Manager roles depends on subjective evaluations by current decision makers, who are usually men.

Fang and Huang concluded that men and women may be evaluated using different subjective criteria, resulting in differential career advancement for women and men.

Ronald Burt

Ronald Burt

Career-related social connections (“social capital”) studied by Fang and Huang are affected by legitimacy, reputation, and network structures, argued University of Chicago’s Ronald Burt.
He suggested that “holes” in a social network are entrepreneurial opportunities to add value, and women who fill network holes increase their possibility of advancement.

Burt noted limitations to this approach:  “…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 noted that women and minorities succeed by leveraging the network of legitimate strategic partners, suggesting the importance of sponsors for underrepresented groups. 

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

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©Kathryn Welds