Abstract
A recently published study found that markets react negatively to the appointment of Black CEOs, with an average cumulative abnormal return of -4.21%. The authors argue this is caused by investors invoking racial biases and stereotypes. In contrast, using a comparable sampling period and analytic approach, we find markets react positively to the appointment of Black CEOs with an average abnormal return of +3.1% (or +2.0% after conservatively addressing outliers). Our results are consistent across several alternative analyses, sample adjustments, and robustness tests. We argue racial biases and stereotypes in markets are outweighed by investor appreciation for the higher bar for advancement that Black CEOs face and the exceptional attributes they must exhibit as a result. To conclude, we discuss implications of our findings.
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