Information and the Gender Gap in the Market for Top Managers: Evidence from a Quasi-Experiment

Abstract

This study examines the role of information on the gender gap in the executive labor market from the market frictions perspective. We examine whether increases in objective and reliable information about managerial quality improve the promotion rates of women managers. To obtain exogenous variation in the availability of information, we exploit a natural experiment provided by the adoption of the International Financial Reporting Standards (IFRS) in 2005 by the European Union countries. Consistent with statistical discrimination theory, we find that when performance information is more available and reliable, the promotion rates of women executives almost double. These increases are driven by both internal and external promotions. However, the gains in advancement rates are dampened in regions where societal views on women in the workplace are less favorable. This study rectifies the data and empirical challenges in identifying sources of discrimination in the executive labor market and offers implications for theory development and firm policy.