Closing the Gender Pay Gap: Analyst Coverage, Stakeholder Attention, and Gender Differences in Executive Compensation

The gender pay gap among firms’ upper echelons is a prominent issue not only because it concerns equality in the workplace, but also because it may impact firms’ culture and performance. Responding to calls to better understand how stakeholder expectations and pressures might influence the gender pay gap, this study examines the role of a key stakeholder group, i.e., financial analysts, in curbing executive gender pay gap. Drawing on the stakeholder and attention-based views of the firm, we contend that analyst coverage may counter the pay gap by a) raising other stakeholders’ attention on discriminatory pay setting practices; and b) reducing information asymmetries in the executive labor market. Both firm- and individual-level econometric analyses on a sample of 38,211 executives working in 3,473 firms support our hypothesis: an increase in analyst firm coverage helps to reduce the gender pay gap among the top executives of S&P 1500 firms between 1992 and 2016. Post-hoc analyses - that use the closure of brokerage houses as an exogeneous shock - lend further causal support to our claims. Our results advance the literature at the nexus of the stakeholder theory and attention-based view of the firm by unveiling the role of intermediaries in channeling the limited stakeholder attention to certain firms, contributing to the development of a stakeholder-based theory of executive pay.