Does gender influence portfolio selection for financial institutions

Abstract

Gender stereotypes can influence different investors’ perceptions and expectations between male and female led firms. Using institutional ownership data for U.S. S&P 500 companies from 2001 to 2017, we examine how CEO gender affects institutional investment decisions. We find that passive (as opposed to active) institutions invest greater proportions of their portfolios in firms with male CEOs compared to those with female CEOs. One ex-planation for this result is the stereotype that leadership skill is perceived to be a masculine trait. On the other hand, we find no evidence that the fraction of female board members af-fects the portfolio weights, so the result applies strictly to female leadership, and not to fe-male representation. We also find that passive institutions run by female CEOs tend to invest smaller proportions of their portfolios in each firm, so institutions with female CEOs tend to diversify more than those with male CEOs. This finding suggests that female CEOs of finan-cial institutions are more financially risk-averse than male CEOs. These results imply that gender is an important factor that affects passive institution investment choices, and they illustrate a systematic bias against investing in female led firms.