Gender Trading Gap: Male executives fare better than their female colleagues on insider trades

Jul 10, 2014
Gender Trading Gap: Male executives fare better than their female colleagues on insider trades

(Phys.org) —You've heard of the gender pay gap, but how about the gender trading gap?

New research shows that male executives make a higher return off their registered insider trades, and trade more, than their female colleagues. Their results point to a stronger informal network among male executives. The research is from University of Michigan Stephen M. Ross School of Business professors M.P. Narayanan and Nejat Seyhun, along with A. Can Inci of the Bryant University College of Business.

Their paper, "Gender Differences in Executives' Access to Information," provides the first evidence of gender differences in executive trading activity. These exist among all ranks—officers, board directors, top executives, and surprisingly, even CEOs and CFOs.

"It really looks like an information gap, and that female executives have a disadvantage in these informal networks even if they have equal formal status," said Narayanan, the Robert Morrison Hoffer Professor of Business Administration and professor of finance.

He and Seyhun analyzed the insider trades registered with the Securities and Exchange Commission from 1975 to 2011. They found that while both male and female executives both did better than the average trader, the adjusted 50-day return of 3.2 percent for males was much higher than the 1.6 percent for females.

What accounts for this difference? Narayanan and Seyhun did a number of drill-downs with the data, eliminating gender dispositional differences and adjusting for the larger number of high-ranked male executives. They compared male and female executives of the same rank and still saw superior returns for male executives.

However, the profit advantage for male executives disappears at firms with a large number of highly-placed women. That shows when women have a stronger network, they have the same amount of information and make the same level of profit on their trades.

"Based on what we've found, male executives talk to other male executives more often than they talk to ," said Seyhun, the Jerome B. & Eilene M. York Professor of Business Administration and professor of finance. "This builds up their informal network, where they have ordinary discussions about company issues. Our research finds women aren't as much a part of that discussion unless they are represented well in the higher ranks. It's not enough to have a few women executives. To be fully informed, they have to have a strong network."

Explore further: Male graduates earn more than female graduates

add to favorites email to friend print save as pdf

Related Stories

Insider trading: Another glass ceiling?

Oct 08, 2008

(PhysOrg.com) -- Martha Stewart notwithstanding, female executives who legally trade on inside information make nice, tidy profits—but not as much as men in the same positions, say researchers at the University of Michigan's ...

Male graduates earn more than female graduates

Jun 18, 2014

Male university graduates earn more than their female counterparts and the pay gap will likely increase with the more time spent in the workforce, according to new research.

Women executives twice as likely to leave their jobs as men

Oct 04, 2010

A new study has determined that female executives are more than twice as likely to leave their jobs – voluntarily and involuntarily – as men. Yet despite systemic evidence that women are more likely to depart from ...

Women Still Less Likely to Commit Corporate Fraud

Aug 13, 2013

Women are less likely to take part in corporate crime and fraud even though more women now work in corporations and serve at higher levels of those organizations, according to a team of sociologists.

Recommended for you

When shareholders exacerbate their own banks' crisis

Nov 21, 2014

Banks are increasingly issuing 'CoCo' bonds to boost the levels of equity they hold. In a crisis situation, bondholders are forced to convert these bonds into a bank's equity. To date, such bonds have been ...

Trouble with your boss? Own it

Nov 21, 2014

Don't get along with your boss? Your job performance may actually improve if the two of you can come to grips with the poor relationship.

Ethnic diversity reduces risk of market bubbles

Nov 18, 2014

If they consider it at all, investors likely regard ethnic diversity as a matter of social policy. But new research by an MIT Sloan professor suggests a much more practical reason to consider diversity: compared ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.