Gender matters in how connections impact careers of Wall Street analysts, study shows

SINGAPORE — Even as gender discrimination is on the decline in many industries, the world of finance is still an old boys’ club, at least when it comes to networking, according to a recent study.

Researchers from the international graduate business school INSEAD found that, while female Wall Street analysts are usually just as well-connected as their male counterparts, they don’t reap the same benefits of those connections as men do. Her experiment found that men are perceived to be better analysts because of who they know.

Wall Street sign
A recent study found that who you know on Wall Street can make a big difference in your career — especially for men. Male analysts enjoy greater benefits from connections than their female counterparts, researchers found. (Photo by Rick Tap on Unsplash)

“Thus the value of the ‘old boys club’ is hard to refute in our data,” says Lily Fang, the study’s author and an associate professor of finance at INSEAD, in a release. “We believe our work reveals the bittersweet reality of the decades-long effort in pushing for gender equality. … The evidence clearly points to a more subtle — yet perhaps more insidious — form of gender bias: men and women may be evaluated using different criteria in our subjective minds.”

Fang analyzed alumni ties between analysts and the senior officers and board members of the companies they cover. Both women and men have a school tie with at least one senior officer or board member in one out of every four firms they work with, but perceived performance because of these connections is vastly different between men and women.

Connections improve forecasting accuracy for both men and women on Wall Street, but Fang and her team found the overall impact is stronger for men. Ties between analysts and board members lead to at 2% improvement of accuracy rankings for everyone, but that number jumps to 4% for men, because the market responds more favorably to buy and sell calls by male analysts.

Being “linked in” to others also bears weight on being granted the “All America Research Team” designation, which has a huge effect on the trajectory of Wall Street analysts’ careers. The designation is awarded to those who are voted as the best in the industry by thousands of fund managers in an annual opinion poll. An analyst who receives the coveted award can expect their salary to triple.

Whether or not one receives the All-America designation hinges heavily on the number of errors an analyst makes. Fang found that the more connections a male analyst has, the less likely his errors will affect his chances of receiving the prestigious designation. Conversely, the opposite effect was seen for female analysts: errors are actually even more troublesome when women have more connections.

Fang notes that the link between connections and gender is seen very early on in analysts’ careers. Many young upstarts are jumping on the opportunity to seek out and network with executives who can have a clear impact on their shot at upward mobility.

“This vastly different ability to capitalize on connections at such an early point in their career paths could explain gender gaps that exist throughout long-term career trajectories. The cycle, it seems, starts at the entry level,” says Fang.

The full study was published in the journal Review of Financial Studies.

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