A recent study finds that investment analysts who don’t aggressively push their recommendations face more judgment if they are women. It highlights one way bias can creep into performance evaluations in the investment industry.
For the study, researchers enlisted 179 professional investors. Each investor read a scenario involving an analyst. The investors evaluated how the scenario affected the analyst’s prospects for promotion. There were four variations in the scenario. Each altered whether the analyst persisted or gave up after their investment recommendation was rejected. It also pointed out whether the analyst was male or female.
“The research suggests that when a male analyst is not persistent, professional investors think his behavior is driven by the situation. He has a good reason for not persisting,” says Kristina Rennekamp, corresponding author of the study and an associate professor of accounting at Cornell. “When a woman is not persistent, it is attributed to her being a woman. Others perceive her as lacking aggression, a trait expected of a good analyst.”
Inequalities on Wall Street
“It’s not that being persistent is inherently advantageous. The investment may be a bad one,” says Blake Steenhoven, a recent Ph.D. graduate from Cornell who co-authored the study. “But, culturally, there is an expectation in the investment community that analysts should be confident and aggressive. However, that standard really only applied when the analyst was a woman. The message seems to be ‘Lean in always, or else.'”
The researchers explained that this bias likely stems from “categorization” rather than evidence-based decisions. Investment professionals expect financial analysts to be aggressive and confident. Those characteristics are similar to what many people expect of men. Others often stereotype women as deferential. As a result, when a male analyst behaves in an unexpected way – such as not persisting when their investment recommendation is rejected – their superiors assume that the situation demanded it. When a woman analyst behaves in the same unexpected way, their superiors conclude that she doesn’t possess the necessary attributes of a successful analyst. It reinforces a double standard on women.
“One of the biggest challenges in managerial accounting is helping people evaluate their subordinates’ performance without bias,” says Robert Bloomfield, co-author of the study and Nicholas H. Noyes Professor of Management at Cornell. “The take-away message is to get good data about employees’ performance over time and use it. Otherwise, you are likely to remember only what surprised you. In turn, rely on shortcuts like what category the person falls into.:
“Our findings may surprise people,” Bloomfield adds. “Research suggests that others view women as less likable when they are aggressive. You don’t need to be likable to be successful on Wall Street.”
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