Gender Bias in Promotions: Evidence from Financial Institutions.

This article investigates gender bias in promotion practices within U.S. financial institutions, specifically focusing on mortgage loan officers and their managers across over 1,000 firms from 2014 to 2019. Using Becker's (1957, 1993) model of discrimination, the study tests two key predictions: that biased firms set a higher promotion standard for women and incur costs from inefficient employment practices. The authors construct a nationwide panel linking loan officers' performance data to promotion outcomes and apply an instrumental variables approach to estimate managerial performance at the margin of promotion, thereby addressing omitted variable and infra-marginality problems. Findings reveal that female loan officers are 15% less likely to be promoted than comparable male counterparts and that marginally promoted women outperform marginally promoted men, indicating a higher promotion bar for women consistent with gender bias. The study also finds that bias persists regardless of the decision-maker's gender, suggesting stereotypes rather than taste-based discrimination, and that firms with larger gender promotion gaps experience lower loan volumes, smaller employment, and reduced survival likelihood, implying economic costs of biased promotion practices.