Gender studies within the finance industry have received much attention from academics over the last decades, trying to determine whether the inclusion of more females would result in improved corporate outcomes (e.g. Francis et al., 2015). Specifically, the extant literature has considered gender differences in ethicality, risk attitude, and performance. However, the gender studies within the sell-side analyst profession are limited, due to data restrictions, and despite their limited number, their findings are mixed. For instance, Kumar (2010) found female sell-side analysts to be bolder and more accurate than their male counterparts, whereas Green et al. (2009) reported female sell-side analysts to be less optimistic and less accurate than males. Furthermore, the existing studies on sell-side analyst gender are limited to the U.S. market, hence their findings may not generalise to other markets with different institutional environments. Moreover, other than gender differences in risk attitude and performance, there is growing evidence that women exhibit greater moral reasoning than men (Emerson et al., 2007), which has resulted in improved quality of financial information (e.g. Chen et al., 2017). Within the sell-side analyst profession, the quality of sell-side analyst research is hindered by analyst bias when they are affiliated with the covering stock (Global Analyst Research Settlement), although, to date no study has tested for gender differences in the bias exhibited by affiliated sell-side analysts.
Consequently, this thesis provides three pieces of empirical evidence of the gender differences within the sell-side analyst profession across both Europe and/or the U.S. by answering the following questions: Does gender influence the way affiliated sell-side analysts respond to their conflicts of interest? Do male sell-side analysts issue more optimistic target prices than females? Is there gender heterogeneity in sell-side analyst forecasting skills?
The findings show that in the U.S., while affiliation bias is prevalent in the post regulatory period, there are no gender differences in the target price bias of affiliated sell-side analysts. Nevertheless, when female representation is higher within sanctioned banks, affiliated sell-side analysts exhibit less bias in their target price forecasts. Furthermore, male sell-side analysts issue more optimistic target price forecasts than their female counterparts across both Europe and the U.S. However, the documented gender difference in optimism does not persist in Europe when the endogenous decision to follow certain stocks is controlled for, suggesting that females appear less optimistic due to reverse causality. Lastly, there are no documented gender differences in sell-side analyst forecasting skills in Europe. Although, male sell-side analysts are more likely to issue bold forecasts while females are more likely to herd, implying that the latter has more reputational and career concerns.
The findings of this thesis have implications for regulators who need to address the bias in affiliated sell-side analyst target price forecasts by increasing female representation within the profession in the U.S. Furthermore, the findings have implications for gender studies in risk attitude since gender effect in optimism materialises differently in distinct markets (i.e. Europe and U.S.). Moreover, the findings have implications for policymakers and investment banks as the low female representation within the sell-side analyst profession in Europe is not justified by gender differences in forecasting skills.
