Proof that ethnic minorities have to work harder in banking

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Proof that ethnic minorities have to work harder in banking

If you listen to some people working in finance, they will tell you that the reason black and other ethnic minority individuals don't progress in banking is that they got into the industry unfairly. That they were given an unfair advantage during the recruitment process by banks' diversity programs and inevitably left again when their performance proved subpar. You can see instances of this in the comments at the bottom of this article. 

A new study shows this to be untrue. Ethnic minority candidates have to work harder to get ahead. And even when they prove themselves more competent than white counterparts, they're still held back.

The exhaustive study, which was referred to early today by the Financial Times, was published earlier this week by academics at Texas A&M University and Brigham Young. It looks at data from 7,556 financial analysts and 94,582 quarterly earnings conference calls between 2002 and 2017 and classifies each analyst according to their ethnicity.

The study finds the following objective truths:

  • There are fewer financial analysts from an ethnic minority background (21%) than there are ethnic minorities in the U.S. population as a whole (36%). The proportion of ethnic minority analysts is, however, increasing - in 2002 it was only 11%.
  • The odds that the minority analysts get to ask an initial question on the call are 5% lower than for non-ethnic minority analysts. The odds that they get to ask a subsequent, follow-up question are 20% lower.  
  • If an ethnic minority analyst has achieved Institutional Investor All Star status, they are as likely as non-minority analysts to be asked to participate in the conference call. However, once they're on the call, their All Star status doesn't mitigate the effects that make them less likely to ask questions or follow-up questions. 
  • The odds that ethnic minority analysts are voted All Star investors are 32% lower than for non-minority analysts.
  • None of this has changed over time. If anything, it's got worse. 
  • Analysts at banks with diversity policies don't fare any better than analysts at banks without.

The study shows, then, that ethnic minority analysts are statistically less likely to become All Star analysts and that even when they've put in the additional work to achieve this status, they're still less able to ask questions on calls. Diversity policies do nothing to change this.

Given that they hold all other potential determinants of conference call access constant, the researchers suggest two potential causative factors. One: that the ethnic minority analysts don't want to ask questions as much as their non-ethnic minority counterparts (which they say is highly unlikely). Two: that the corporate managers who select analysts to talk to on results calls are choosing non-ethnic minority analysts (consciously or not) because they themselves are disproportionately white.

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Photo by John Baker on Unsplash

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