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Financial Economics of Gender Throughout the Firm Lifecycle

Paper Session

Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)

Marriott Marquis, Grand Ballroom 4
Hosted By: American Economic Association
  • Chair: Kathryn Shaw, Stanford University

Gender, Race, and Entrepreneurship: A Randomized Field Experiment on Venture Capitalists and Angels

Will Gornall
,
University of British Columbia
Ilya Strebulaev
,
Stanford University

Abstract

We study gender and race in high-impact entrepreneurship within a tightly controlled random field experiment. We sent out 80,000 pitch emails introducing promising but fictitious start-ups to 28,000 venture capitalists and business angels. Each email was sent by a fictitious entrepreneur with a randomly selected gender (male or female) and race (Asian or White). Female entrepreneurs received an 8% higher rate of interested replies than male entrepreneurs pitching identical projects. Asian entrepreneurs received a 6% higher rate than White entrepreneurs. Our results are not consistent with discrimination against females or Asians at the initial contact stage of the investment process. Our experimental design is unable to capture discrimination at subsequent stages. We show an overall high rate of interested replies to cold pitches, which should give hope to budding entrepreneurs without strong networks.

Networking Frictions in Venture Capital, and the Gender Gap in Entrepreneurship

Sabrina T. Howell
,
New York University
Ramana Nanda
,
Harvard Business School

Abstract

Exploiting random assignment of judges to panels at Harvard Business School's New Venture Competition (NVC) we find that exposure to an additional VC judge on a panel increased the likelihood of male participants starting VC-backed ventures after HBS by 30 percent relative to female participants. Results from a survey of NVC participants show that men were 81 percent more likely than women to proactively reach out to the VC judges on their panel after the NVC and there was no difference in the likelihood of judges responding to this outreach. Our results suggest that an important reason men benefited more from being exposed to VCs than women was due to networking frictions, potentially related to homophily in networking. Such frictions may help explain part of the gender gap in entrepreneurship, and can also have implications for how business plan competitions and accelerators design networking between entrepreneurs and investors to facilitate financing of the best (rather than just the best networked) ideas.

Do Firms Respond to Gender Pay Gap Transparency?

Morten Bennedsen
,
INSEAD
Elena Simintzi
,
University of North Carolina-Chapel Hill
Margarita Tsoutsoura
,
Cornell University
Daniel Wolfenzon
,
Columbia University

Abstract

We examine the effect of pay transparency on gender pay gap and firm outcomes. This paper exploits a 2006 legislation change in Denmark that requires firms to provide gender dis-aggregated wage statistics. Using detailed employee-employer administrative data and a difference-in-differences approach, we find that the law reduces the gender pay gap, primarily by slowing the wage growth for male employees. The gender pay gap declines by approximately two percentage points, or a 7% reduction relative to the pre-legislation mean. In addition, the wage transparency mandate causes a reduction in firm productivity and in the overall wage bill, leaving firm profitability unchanged.

The Origins and Real Effects of the Gender Gap: Evidence from CEOs’ Formative Years

Denis Sosyura
,
Arizona State University
Ran Duchin
,
University of Washington
Mike Simutin
,
University of Toronto

Abstract

Male CEOs allocate more investment capital to male division managers than to female division managers in the same firms. Using data from individual Census records, we find that this gender gap is driven by CEOs who grew up in male-dominated families—those where the father was the only income earner and had more education than the mother. The gender gap also increases for CEOs who attended all-male high schools and grew up in neighborhoods with greater gender inequality. The effect of gender on capital budgeting introduces frictions and erodes investment efficiency. Overall, the gender gap originates in CEO preferences developed during formative years and produces significant real effects.
Discussant(s)
David McKenzie
,
World Bank
Alicia Robb
,
Next Wave Impact
Geoffrey Tate
,
University of Maryland
Alex He
,
University of Maryland
JEL Classifications
  • G3 - Corporate Finance and Governance
  • G2 - Financial Institutions and Services