Igniting Change: Yi Luo's Journey Into Gender Disparities in Finance

In their paper, "The Effect of Gender on Investors’ Judgments and Decision-Making" published by the Journal of Business Ethics, Professor Yi Luo and her research collaborator Professor Steven E. Salterio (Queens University) unveil the intricate dynamics of gender in finance through investor reactions as more individuals call for a more inclusive and equitable future in the financial world. 

YI’S JOURNEY INTO GENDER DYNAMICS IN FINANCE  

Professor Yi Luo, ignited her passion for gender issues during her practical experiences when a mentor's departure unveiled a gender disparity at the partner level. Witnessing the finance industry's staggering 80% male dominance among equity analysts (Kumar, 2010), Yi immersed herself into literature, uncovering the subtle ways women faced career disadvantages, such as less assertive negotiation styles. Fueled by this knowledge, she continues to explore the intricate interplay of gender in decision-making and careers, especially within accounting and finance. Inspired by "resume audit studies," where researchers extract responses to messages that are otherwise identical, varying only in the gender of the authors (or different ethnicities),she and her coauthor designed a study in the investment arena where they investigate how gender dynamics shape responses in a domain where analysts wield persuasive power over retail investors, promising fresh insights and perspective on gender in finance. 

GENDER DYNAMICS VS INVESTMENT DECISION-MAKING  

Yi and her team try to identify the intricate dynamics of how an investor's gender intertwines with that of an equity analyst, shaping reactions to analyst reports. Diverging from traditional studies that focus on gender evaluations, for example through promotion structures, her research looks at advisory roles, where male and female analysts provide guidance to less sophisticated investors. The burning question: Do investors respond differently to advice based on the gender of the professional? Through a carefully crafted experiment, randomly assigning participants into conditions, the team manipulated factors like analyst's report recommendations, gender representation through names and silhouette profile pictures to control for perceived beauty—a known factor affecting career progression. The initial experiment, engaging 464 participants with investment experience and a reasonable command of accounting and finance knowledge, revealed a fascinating homophilic relationship, with female investors displaying a stronger reliance on female analyst reports. Determined, the team conducted a follow-up experiment with 137 additional participants, seeking to test the effect of a gender frame on reactions to female analyst recommendations, regardless of the investor's own gender. The study sets to uncover new knowledge in the dynamics of gender in investment decision-making. 

THE UNEXPECTED TWIST  

Surprisingly, when gender became a focal point – that is, when participants were presented with a news article emphasizing the accuracy and bold decision-making of female analysts (inspired by this real article) – female investors no longer exhibited a heightened response to female analyst reports. It seems the introduction of this "news prime" may have had an unexpected impact, potentially working against the anticipated positive response for female analysts. 

THE CHALLENGES  

Similar to highlighting gender before a math exam may lead to girls’ negative attitudes among girls (and this other publication), the study stresses the challenges faced by gender minorities in professional fields. In fact, the research reveals that accentuating gender results in attenuated responses from female investors to female analyst reports, potentially affecting performance evaluations if analysts are judged based on the market reaction their reports generate. Given past research suggesting that female analysts are more likely to be star analysts (Kumar, 2010), this muted reaction could translate into potential losses for female investors.  

FUTURE HORIZONS: YI'S VISION FOR INCLUSIVE FINANCE  

As for the future, Yi expresses a keen interest in further exploring gender issues through interdisciplinary collaborations. Given the applied nature of accounting, her primary motivation is to dig into research questions that hold relevance to real-world practice. Hence, her primary approach involves employing interviews and experiments to grasp the dynamics of individual interactions within the system. For instance, examining auditors' responses during the initial wave of COVID-19 in high-stakes year-end audits. Or, exploring avenues for enhancing decision-making, such as refining training programs for tax auditors and improving the standard-setting process. 

Yi draws inspiration from the impactful work of Marianne Bertrand at Chicago Booth, who has conducted inspiring studies relating to "resume studies" on ethnicity and contributed significant research on gender-related topics, such as the gender gap among post-MBA professionals. With a passion for practical relevance in accounting, Yi aims to leave a legacy focused on understanding and improving real-world practices in her field. 

The findings were also covered by Smith Insight (https://smith.queensu.ca/insight/content/the-shadow-over-female-investment-analysts.php).