Too Good to Be True? The Unintended Signaling Effects of Educational Prestige on External Expectations of Team Performance

Posted: 29 Jan 2009 Last revised: 2 Mar 2015

See all articles by Stephen J. Sauer

Stephen J. Sauer

Cornell University - Johnson School of Management

Melissa C. Thomas-Hunt

University of Virginia - Darden School of Business

Patrick Morris

affiliation not provided to SSRN

Date Written: January 25, 2009

Abstract

In this paper we report the results of three experimental studies designed to test how demographic characteristics affect outsiders' assessments of a firm's top managers. We draw on theories of evaluation, status characteristics, and social identity to examine the interactive effects of managers' racial characteristics and educational prestige on external perceptions. In the first study, we find that top executives' educational background and race affected analysts' valuation of a firm's stock. Outside analysts made the highest stock price projections for firms led by Caucasian executives who had highly prestigious educational backgrounds but made the lowest valuations for firms led by African Americans with the same prestigious education. We posit that the moderating effect of executives' racial characteristics stems from outsiders' assumptions that African American managers received preferential treatment in the admissions process for high-prestige universities. In the second study we find that outsiders did in fact make assumptions of race-based preferential treatment when they encountered African American managers from prestigious schools. In the third study, we find that when we explicitly removed the preferential selection bias, analysts gave the same stock valuation to firms led by Caucasian and African American executives with high educational prestige.

Keywords: status, diversity, evaluation

Suggested Citation

Sauer, Stephen J. and Thomas-Hunt, Melissa C. and Morris, Patrick, Too Good to Be True? The Unintended Signaling Effects of Educational Prestige on External Expectations of Team Performance (January 25, 2009). Johnson School Research Paper Series No. #15-09, Available at SSRN: https://ssrn.com/abstract=1334178

Stephen J. Sauer (Contact Author)

Cornell University - Johnson School of Management ( email )

Ithaca, NY 14853
United States

Melissa C. Thomas-Hunt

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Patrick Morris

affiliation not provided to SSRN ( email )

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
699
PlumX Metrics