Examining investor reactions to appointments of Black top management executives and CEOs
Note: Examining investor reactions to appointments of Black top management executives and CEOs. Strat Mgmt J. Accepted Author Manuscript. https://doi-org.ezproxyberklee.flo.org/10.1002/smj.3284
A previous version of this article was posted on April 17, 2021. In response to specific concerns expressed by readers, the authors (in consultation with the journal editors) decided to make changes to the accepted version, prior to the upcoming copyediting, typesetting, proofing, and correction stages that precede an article being published as a final Version of Record per Wiley's article production policy. The updated version includes a more detailed description of the data, notably the construction of the cumulative abnormal return measure and the coding method used to infer the race of executives. It also contains an appendix that presents robustness results. In addition, it focuses on mechanisms that are directly tested in the motivation of hypotheses and the discussion of results. Finally, words and phrases were updated to reflect current use. The hypotheses, data set, empirical results, and direct interpretation of the results are unchanged. The authors and editors would like to thank the readers who expressed the concerns.
Abstract
Research summary
The authors investigated investor reactions to the appointment of Black executives. The results indicate that investors respond: (1) more negatively to the announcement of Black CEO appointments than to White CEO appointments, (2) more negatively to the announcement of the Black top management team (TMT) appointments than to White TMT appointments, (3) more negatively to the announcement of Black CEO appointments than to Black TMT appointments, and (4) more negatively to the announcement of Black CEO appointments who are promoted from outside the firm than to the announcement of Black CEO appointments who are promoted from inside the firm. Moreover, the post-hoc analysis revealed that investors react more negatively to the TMT appointment of Black executives than to the TMT appointment of Latino or Asian executives. Our results show the negative association between the appointment of Black executives and investors' reactions, and we hope it sparks future research examining causal factors and their potential solutions.
Managerial summary
Investors react more negatively to the announcement of Black CEO appointments than to White CEO appointments, and more negatively to the announcement of Black CEO appointments who are promoted from outside the firm than to the announcement of Black CEO appointments who are promoted from inside the firm. Moreover, investors react more negatively to TMT appointments of Black executives than to TMT appointments of White, Latino, or Asian executives.
