If you've got an opening for a CEO, appoint a woman and your stock price will drop nearly 3% the next day. That's the key finding of a study by business school professors Dr. Erika James of the University of Virginia and Dr. Peggy Lee of Arizona State. They looked at CEO hiring announcements from 1990 to 2000, comparing share prices the day before and the day after. They found no similar drop in stock price when it's announced that a man will take the job.
The good news is that the fall in prices don't persist. Once women prove they're capable of running the ship, stock prices go back up. Still, this is another example of knee-jerk stock market reactions that just plain get things wrong (click here to read about the mistake stock markets make in rewarding corporate layoffs announcements). Wall Street reacts based on the bizarre assumption that women aren't up to the job. Somebody please explain to me why so much of our national economic policy is based on the beliefs of these neanderthals.
The James and Lee study, She'-e-os: gender effects and investor reactions to the announcements of top executive appointments, (click here for the abstract) was published in March in the Strategic Management Journal.
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