Discovery at Carlson·41 Market Response to Pay Disparities May Spur Change

发布人：余曙暑 发布日期：2023-04-09

Market Response to Pay Disparities May Spur Change

What role can investors play in addressing inequality?

A large one, according to recent research from Tracy Wang, the John Spooner Professor of Finance.

Following a new requirement for public companies to disclose the ratios of pay between CEOs and workers in 2018, Wang and her colleagues studied the initial investor reactions. The paper, “Do Equity Markets Care about Income Inequality? Evidence from Pay Ratio Disclosure,” was published in the Journal of Finance.

Professor Wang’s research is the first to suggest that a significant fraction of investors, including institutional investors, dislike income inequality. Her research finds that firms disclosing higher pay disparities between CEOs and rank-and-file employees experienced significant value reductions after their pay ratio disclosures. The valuation effect is driven by inequality-averse investors rebalancing their portfolios away from stocks of firms with high disclosed pay ratios.

Wang, also the chairperson of the Finance Department, notes that this research, and others, suggests the growing presence of investors concerned about pay disparity and income inequality—through portfolio decisions and impact on firms’ valuations—could lead to changes in corporate culture and policies that help restrain inequality, complementing political and other forces tackling this challenge.

Related Research on Inequality

Avner Ben-Ner

PROFESSOR

Department of Work and Organizations

Paper: “A Sectoral Comparison of Wage Levels and Wage Inequality in Human Services Industries”

Journal: Nonprofit and Voluntary Sector Quarterly

Published: August 2011

Takeaways:

  • Compared to for-profit organizations, nonprofit and local government organizations are less likely to provide financial incentives;

  • Pay lower or higher compensation to their employees, depending on multiple factors; and

  • Have less wage inequality.

EDUCATION:

BA 1975 Economics and Philosophy Ben Gurion Univ.

MA 1978 Economics State Univ. of New York-Stony Brook

PhD 1981 Economics State Univ. of New York-Stony Brook

EXPERTISE:

Organization structure, behavior and performance

Behavioral Economics

Nonprofit organizations

 

Sofia Bapna

ASSISTANT PROFESSOR

Information & Decision Sciences

Paper: “Gender Gaps in Equity Crowdfunding: Evidence from a Randomized Field Experiment”

Journal: Management Science

Published: May 2021

Takeaways:

  • Gender gaps observed in traditional equity financing are ameliorated in equity crowdfunding.

  • In low-stakes crowdfunding, inexperienced female investors are significantly more interested in ventures with female founders than those with male founders.

  • In high-stakes crowdfunding, investor experience serves as a contingency that reduces female investors’ preference for female founders.

EDUCATION:

PhD 2016 Strategic Management & Entrepreneurship University of Minnesota

Master of Business Administration 2004 Babson College – F. W. Olin School of Business

Bachelor of Technology in Computer Engineering 1993 Computer Engineering Manipal Institute of Technology, India

EXPERTISE:

Digital Platforms, Entrepreneurship, Gender Gaps