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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.

Have a confidential story, tip, or comment you’d like to share? Contact: in the first instance. Whatsapp/Signal/Telegram also available. Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)

Photo by John Baker on Unsplash

AUTHORSarah Butcher Global Editor
  • On
    On point
    12 June 2020

    From the view and experience of an Asian heritage minority, I agree with Ms. Butcher. You have to be in the skin to understand and believe it. I can relate to her article, that it tells the truth. Compounded by ageism, I also feel excluded and dismissed in the finance industry.

  • th
    this article is a joke
    12 June 2020

    Another in a series of incredibly biased and short-sighted articles seeking to capitalize on the current situation. Click-bait is the term I believe. All the current "hot" areas within finance are dominated by minorities, IT, quant research, electronic trading, algorithmic trading, data science to name a few. Yet you seek to ignore these and focus on stuffy equity research which no one really cares about anymore.

  • Bl
    12 June 2020

    This is just your perspective based on biased studies and chosen data. Why didn't you pick up successful stories instead? What are you trying to conclude? That ethnic minorities should stick to doing non-"white"collar jobs?? Huhh!!

  • An
    Angry Dick
    11 June 2020

    Work smart, nor hard!
    But this is not for everyone, because the most people are just idiots.

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