When Harry Fired Sally: The Double Standard in Punishing Misconduct

by Mark Egan, Gregor Matvos, and Amit Seru

Overview — Despite committing misconduct less often and less severely than men, female advisers in the financial adviser industry face more severe punishment in the labor market, a finding strongly correlated with the gender composition of the managerial team. A similar punishment gap and mitigating factors affect ethnic minority men.

Author Abstract

We examine gender differences in misconduct punishment in the financial advisory industry. We find evidence of a "gender punishment gap": following an incident of misconduct, female advisers are 20 percent more likely to lose their jobs and 30 percent less likely to find new jobs relative to male advisers. Females face harsher outcomes despite engaging in misconduct that is 20 percent less costly and having a substantially lower propensity towards repeat offenses. The gender punishment gap in hiring and firing dissipates at firms with a greater percentage of female managers at the firm or local branch level. The gender punishment gap is not driven by gender differences in occupation (type of job, firm, market, or financial products handled), productivity, misconduct, or recidivism. We extend our analysis to explore the differential treatment of ethnic minorities and find similar patterns of "in-group" tolerance. Our evidence is inconsistent with a simple Bayesian model and suggests instead that managers are more forgiving of missteps among members of their own gender/ethnic group.