Gender and beauty in the financial analyst profession

It has been over three years since the #MeToo movement first gathered steam and threw a spotlight on gender inequality in the workplace. The rise of the pandemic, however, has impacted the momentum of the movement: This year, a report of Women in Work by PwC revealed that women’s job losses during Covid-19 outpaced that of men’s, and women also experienced a disproportionate burden of unpaid care work during the global crisis.

It is therefore timely that SMU Assistant Professor of Accounting Lin An-Ping, along with other co-authors have investigated if gender and physical appearance has a significant impact on the career advancement of professionals in the financial industry in both the US and China. The study, Gender and beauty in the financial analyst profession, delves into whether a beauty bias exists and how beauty has a significant impact on gender discrimination in the two countries’ financial industry. It specifically addresses the chances of being recognised as a “star analyst” and how gender and beauty affect the likelihood of this happening in the two countries.

US vs China

The international finance publication Institutional Investor first launched a ranking of “all-star analysts” in 1972, which ranks top analysts based on portfolio managers’ votes. In China, New Fortune Magazine has been hosting the All-Star analyst voting every October since 2003. The awards ceremony is considered to be one of the most significant events in China’s financial industry. Hence, becoming a star analyst is a career milestone for financial analysts in the country.

In the US, since the passing of the Federal Civil Rights Legislation in the 1960s, any form of gender discrimination (such as preference for a particular gender in a job posting) is prohibited. However, gender discrimination still manifests itself subtly in American workplaces today.

Female financial analysts in America stated “facing a glass ceiling in the financial services industry” as their top concern in their careers. Male analysts at US firms also statistically earn higher wages than female analysts with comparable skills and responsibilities, and are more likely to be promoted.

In China, noticeable gender discrimination remains commonplace. One study shows that over one-third of Chinese companies openly post job positions with a preferred gender. Even the Chinese government includes job postings specifying a preference for males. But there are also hidden forms of gender discrimination in China.

Many industries in China have fewer female executives, and female workers receive lower compensation and have a higher likelihood of dismissal compared to their male counterparts. Given these issues, Dr Lin and his co-authors’ research yielded some somewhat surprising results. Their findings suggest that female analysts are discriminated against in opposing directions in the two countries. In particular, US voters discriminate in favour of female analysts, whereas those in China discriminate against female analysts.

Beauty premium in the labour market

In the US, past psychology studies have found that a beauty premium is evident in the labour market. “Beauty premium” is described as the extra compensation that physically attractive workers receive compared to their counterparts with below-average looks. Research shows that good-looking workers can earn 10 to 15 per cent more than others in similar roles, and are more likely to be selected at interviews.

In China, it is common for companies to include a preference for certain physical attributes for female applicants. These attributes pertain to height, weight, voice, and facial appearance, which are all irrelevant to their ability to perform the job’s duties. Some Chinese technology companies, such as Alibaba, use female attractiveness to encourage people to apply by boasting about “beautiful female colleagues” or “goddesses” working for their firms.

For this study, Dr Lin and his co-authors had a group of survey respondents rank analyst’s photos in terms of their physical appearance. The results showed that the beauty premium in All-Star analyst voting does exist in China but not in the US. That is, being good-looking increases the likelihood of an analyst being voted as an All-Star only in China. As such, they conclude that the beauty premium is not a universal phenomenon.

Relative impact of gender and beauty

Despite the positive connotations of the term “beauty premium,” the possession of a pleasing appearance may not always be beneficial for employees.

In fact, attractive female financial analyst candidates are more likely to be rated lower by women evaluators over plain-looking candidates. Some studies in the US suggest that this is because beautiful females are more likely to be perceived as egotistical, snobbish, and unsympathetic. In fact, attractive female analysts may actually find it more difficult to get hired, particularly if their interviewer is a woman.

In China, companies explicitly request physical attributes (age, height, and beauty) in job postings, particularly when they’re hiring female employees. Unlike in the US, there is little data to suggest that good-looking females experience any negative bias when applying for jobs, although, as we’ve seen, women, in general, are discriminated against openly in the Chinese job market.

The study found that gender and beauty have a relative impact on financial analysts’ likelihood to be voted All-Stars. While Chinese female analysts were less likely than men to be selected, good-looking female analysts had a higher likelihood of being voted All-Stars than less attractive ones. As a sharp contrast, while US female analysts were more likely than men to be selected, good-looking female analysts not only receive no premium for their attractiveness but are also penalised in the All-Star analyst voting in the US.

Overall, these results suggest that the effects of gender discrimination, beauty bias, and their interaction are conditional, and may be affected by culture. The professors commented that “The financial industry is so competitive that if you have the talent you should be rewarded, but stereotypes and bias exist in our society regardless of how competitive the industry is.”