Does perception of social issues affect portfolio choices? Evidence from the #MeToo movement

Abstract

Did the #MeToo movement, inspired by a Twitter post in late 2017 following the Weinstein scandal, influence the asset allocation decision process of mutual fund managers intending to show support for women empowerment? We find evidence to support the influence of such attention. We utilize the breakout of the #MeToo movement as an exogenous shock to the perception of gender equity issues. Using a difference-in-differences framework, we show that, compared to passively managed mutual funds, actively managed mutual funds tilt their portfolios toward firms with greater female representation in the C-suite, but only after the breakout. Our results are not explained by performance seeking, but are in part attributable to catering incentives. Moreover, the results become less significant when the marginal impact of changing perception is small. Using Google search volume to capture public sentiment closely tied to the perception of gender equality yields consistent results based on a larger sample. Our study sheds light on the recent rise of “gender lens investing” in the mutual fund industry.