Finance and Race
Paper Session
Friday, Jan. 3, 2025 10:15 AM - 12:15 PM (PST)
- Rohan Williamson, Georgetown University
Venturing into Racial Diversity on Startup Boards
Abstract
What drives racial diversity on startup boards? We provide the first evidence on this question by exploiting the demand shock from the 2020 George Floyd protests. Using facial recognition technology to measure race, we find that Black director appointments nearly doubled (from 1.8% to 3.1%) in the year following the protests, a much smaller response than in public firms. Access to diverse candidates shaped startups' ability to respond: appointments increased most in areas with more Black professionals and in executive and independent director roles, while venture capital firms showed no increase in Black appointees. Capital market incentives drove these responses: startups planning to raise capital in public or private markets were three times more likely to add Black directors. Rather than competing for the same directors, public firms expanded the candidate pool, increasingly appointing first-time directors. Despite the sudden increase in demand, Black directors had comparable qualifications to other directors, and startups adding Black directors showed no change in performance. Our findings reveal that concentrated ownership, while facilitating quick decisions, entrenches traditional networks that limit board diversity.Does the Market Mis-Value Non-Executive Employee Diversity?
Abstract
This study examines whether financial market participants are able to assess the economic value of non-executive diversity. I construct a new measure of diversity among non-executive employees utilizing a large and unique resume-level dataset. Using this diversity measure, I find that non-executive diversity has a strong relation with longer-term corporate innovation and employee satisfaction, but it is unrelated to short-run financial performance. The market does not fully recognize the value of minority employees, potentially because it focuses more on tangible, short-term performance and pays relatively less attention on intangible, long-term human capital productivity. During the 1990 to 2021 period, a trading strategy that exploits this market misvaluation yields an annualized risk-adjusted return of over 7%.Gender and Racial Favoritism in Crowdfunding—Evidence from the Field
Abstract
We examine whether and how racial and gender biases influence crowdfunding success using a natural field experiment on GoFundMe and a complementary survey experiment on Amazon Mechanical Turk (MTurk). The field experiment allows us to directly estimate the causal effects of race and gender on financing outcomes. Results from a neutral benchmark treatment show evidence consistent with favoritism towards white and men as opposed to animosity against minorities and women. We further show that racial and gender disparities in the perceived trustworthiness of the fundraiser drive the observed differences in funding outcomes through influencing the perceived credibility of the campaign. Finally, we provide evidence that signals on the fundraiser’s professional qualification and the campaign’s progress attenuate the observed racial and gender disparities; as such quality signals serve to enhance trustworthiness of the fundraiser and the perceived credibility of the campaign.Discussant(s)
Will Gornall
,
University of British Columbia
Laura Field
,
University of Delaware
Justin Birru
,
Ohio State University
Alberto Rossi
,
Georgetown University
JEL Classifications
- G0 - General