Who Gets the Benefit of the Doubt? CEO Gender and News about Firm Performance

I show that financial markets react asymmetrically to bad news about firm performance depending on whether it is delivered by male or female CEOs. This asymmetry manifests itself in analysts’ forecasts, stock returns on earnings announcement days, and even in the tone that analysts adopt in earnings conference calls. I argue that these patterns have a common origin in a reduced skepticism towards male CEOs. To make this case, I first document that analysts' beliefs about firm performance systematically under-react to bad news from male-led companies relative to the rational expectations benchmark, whereas they adjust their expectations rationally to similar bad news from female-led companies. Next, I show that investors also display this biased reaction to news, with stock returns reacting less negatively to negative surprises from male-led companies relative to their female-led peers on earnings announcement days. I then shed light on the underlying mechanism by constructing a text-based measure of disagreement from earnings conference calls. After negative surprises, analysts express less disagreement with the narrative conveyed by male-led firms relative to their female-led peers. This effect is entirely concentrated amongst male analysts, who represent, on average, more than 85% of the participants in these calls.

The Diffusion of New Technologies (with Aakash Kalyani, Nicholas Bloom, Tarek Hassan, Josh Lerner, and Ahmed Tahoun)

Forthcoming at The Quarterly Journal of Economics

We identify phrases associated with novel technologies using textual analysis of patents, job postings, and earnings calls, enabling us to identify four stylized facts on the diffusion of jobs relating to new technologies. First, the development of economically impactful new technologies is geographically highly concentrated, more so even than overall patenting: 56% of the most economically impactful technologies come from just two U.S. locations, Silicon Valley and the Northeast Corridor. Second, as the technologies mature and the number of related jobs grows, hiring spreads geographically. But this process is very slow, taking around 50 years to disperse fully. Third, while initial hiring in new technologies is highly skill biased, over time the mean skill level in new positions declines, drawing in an increasing number of lower-skilled workers. Finally, the geographic spread of hiring is slowest for higher-skilled positions, with the locations where new technologies were pioneered remaining the focus for the technology’s high-skill jobs for decades.

[Data] [NBER Working Paper]

CEO Gender and Beliefs about Firm Performance: An Experimental Approach (with Beatrice Ferrario)

Does CEO gender influence how we perceive firm performance? If so, why? In this paper, we take an experimental approach to address these issues. We design an experiment where the assignment of CEO gender is randomized and measure the extent to which gender affects participants’ forecasts of firm profits. In the experiment, participants predict the profits of three real US public companies, one of which has the gender of its CEO (disclosed via a picture) altered. For each company, participants first receive real data about its past financial performance, along with experts’ forecasts for future profits and form predictions for profits in the next two quarters. Then, they receive information about the actual profit for the first quarter and revise their prediction for the second quarter. The design includes a “good news” (profit realization higher than experts’ forecasts) versus “bad news” (profit realization lower than experts’ forecasts) treatment that allows us to test whether the effect of CEO gender on beliefs is intermediated through the sign of the news received. Finally, the study also includes questions aimed at determining the mechanism behind the dependency of beliefs about firm performance on CEO gender — e.g. do participants think that female CEOs are less skilled than their male peers? 

Anchored Inflation Expectations and the Term Structure of Interest Rates (with Carlos Carvalho and Stefano Eusepi)

Evidence suggests that the moments of the nominal yield curve depend on whether inflation expectations are anchored or not. Yet, traditional term structure models overlook this critical factor. This paper explores the implications of the anchoring of long-run inflation expectations to the term structure of nominal interest rates, proposing a conceptual framework with endogenous anchoring of inflation expectations. The model assumes that agents have subjective beliefs instead of rational expectations — following Carvalho et al. (2023)  — and allows for long-run inflation and real interest trends that are non-stationary — as in Bauer and Rudebusch (2020).