Is Gender in the Pocket of Investors? Identifying Gender Bias Towards CEOs with a Lab Experiment

We build a trading experiment to causally identify gender bias towards newly appointed CEOs. We distinguish between gender stereotypes and in-group favoritism / out-group discrimination as theoretical sources of gender bias. When a female CEO is appointed, we find that female participants buy stocks, while male participants sell stocks. The opposite holds when a male CEO is appointed. For male traders, our results are consistent with both stereotypes and in-group bias. For female traders, we are able to identify evidence of in-group favoritism towards female CEOs that dominates the potential effect of their gender stereotypes towards female CEOs. These gender biases combined with the lack of gender diversity in the stock market can explain both the negative stock market reaction to female CEO appointments and the underrepresentation of female CEOs. These results suggest that the stock market is ‘gendered’ and constitutes a glass ceiling barrier for female reaching CEO positions.