Minority analysts get less time to probe management than white peers

Financial analysts from minority racial groups enjoy less access to corporate management than their white peers, according to a new study that analyses transcripts from tens of thousands of company conference calls. 

The study found that minority analysts in the US are 5 per cent less likely to be given time to ask questions on company calls than their white peers, and 20 per cent less likely to be given time for a follow-up question, a pattern that was consistent across the 2002-2017 study period.

The opportunity to ask questions in conference calls is not in itself particularly important to the careers of sellside analysts, who work for banks and brokers, the authors argue, but it may be a good proxy for more important forms of discrimination. 

Nate Sharp, one of the authors and a professor of business at Texas A&M University, said that securing private conversations with management teams, for themselves and for clients, is the most highly valued skill for sellside analysts. “If minority analysts are discriminated against in such a public setting, we argue that is probably the floor for discrimination in more private settings,” he said. 

Executives at large public companies in the US remain overwhelmingly white. 

The study, entitled “A Level Playing Field?” was co-authored by Mr Sharp and three other scholars at Texas A&M and Brigham Young University. It looked at interactions of some 7,500 analysts with executives on some 95,000 calls. 

To ensure that the racial differences in which analysts were chosen to speak were not a byproduct of minority representation at the big “bulge bracket” Wall Street firms, the results were controlled for firm size. The authors also found that the average sizes of the firms where minority and white analysts worked were only slightly different.

The proportion of minority analysts grew dramatically over the study period, from 11 per cent to 21 per cent of the total, but that is still lower than the US population, which is over one-third ethnic minorities. The greater numbers over the period had no effect on interaction with management during calls. 

Minority analysts who have been voted on to Institutional Investor’s prestigious “all-star” analyst list by their clients have the same odds of being allotted time for a question on calls as white analysts, the study found.

But such analysts still have the same, lower odds of being permitted a follow-up question, and the probability of being voted an all-star is 32 per cent lower for minorities than white analysts.