Closing the Gender Pay Gap: Analyst coverage, stakeholder attention, and gender differences in executive compensation

Summary

The research paper "Closing the Gender Pay Gap: Analyst coverage, stakeholder attention, and gender differences in executive compensation" by Maoret, Moreira, and Sabanci (2024) investigates the role of financial analysts and stakeholder attention in influencing the gender pay gap among firms' top executives. The authors contend that financial analyst coverage can curb the executive gender pay gap by increasing other stakeholders' awareness of discriminatory pay practices and by reducing information asymmetries within the executive labor market. The study's core hypothesis, supported by their results, suggests that the executive gender pay gap widens when firms experience an exogenous decline in analyst coverage. [Abstract] The methodology employed firm- and individual-level econometric analyses on a substantial sample of 38,211 executives across 3,473 S&P 1500 firms, spanning the years 1992 to 2016. To ensure comparability and address potential biases, the researchers utilized Coarsened Exact Matching (CEM) to create a control group of male executives for each female executive, matching them within the same firm and year. Furthermore, instrumental variable models (2SLS) were used, with "Expected Coverage" serving as an instrument for "Analyst Coverage," to establish a causal link. Post-hoc analyses, which leveraged the exogenous shock of brokerage house closures, provided additional causal support for their claims. The findings reveal that an increase in analyst firm coverage contributes to reducing the gender pay gap among top executives. This reduction is primarily driven by an increase in female executive remuneration, with male executive compensation generally remaining unaffected. The study also observed that the narrowing of the pay gap is particularly pronounced through salary increases for female executives who have recently joined a company. Moreover, analyst coverage was found to increase the likelihood of a pay raise for both genders following a career mobility event, albeit with a stronger effect for female executives. The authors argue that analyst reports effectively mitigate the gender pay gap by drawing stakeholders' attention to discriminatory practices and by fostering greater job market fluidity, which enables executive mobility to counter potential discrimination and balance remuneration across genders. This collective evidence supports the idea that the attention of financial analysts acts as an external monitoring mechanism, promoting more equitable compensation outcomes.