How do investors really react to the appointment of black CEOs? That’s the title of a recent study published in the Strategic Management Journal and the answer is: very positively indeed.

Unlike a 2021 study which found a company’s stock often falls when a black chief executive is appointed, the authors found such appointments are typically followed by short-term share price gains of 3.1 per cent. Why?

The study suggests a “high bar” theory – that is, racial bias means a black CEO candidate must be exceptional to even be considered for the role. It noted 93 per cent of black CEOs have advanced degrees, compared with 53 per cent of white CEOs. Black CEOs are also more likely to have elite degrees.

Markets recognise these qualities; hence, companies tend to enjoy a share price boost.