Husbands are making the financial decisions — even when their wives work in banking

March 9, 2021
Husbands disregard their wives' financial advice, even when their wives are in banking. (Unsplash/Headway)

Husbands disregard their wives' financial advice, even when their wives are in banking. (Unsplash/Headway)

Traditional gender norms may be costing straight people, according to a new study showing that some husbands are controlling the household finances even when their wives work in the financial sector.

In the Journal of Finance paper, published Feb. 2, author Da Ke looked at data from over 8 million U.S. households, then conducted an experiment with 3,961 married subjects living in the U.S. The data analysis revealed that when a husband worked in finance, households had a two to seven percentage point higher probability of investing than straight couples in which the wife worked in finance. 

In a U.S. Census dataset that captured 8.8 million households, Ke, an assistant professor of finance at the University of South Carolina, found that 21% of the households in which the wife worked in finance participated in the stock market — barely higher than the overall participation rate of 20%. By contrast, 32% of households with a husband in finance in that dataset invested in the stock market. 

Moreover, Ke's analysis of one 854,000-person sample from the Current Population Survey showed that when a wife switched careers to a job in finance — taking a position such as equity analyst, insurance broker or portfolio manager — that only increased the probability of a couple investing by six percentage points. When a husband switched to a career in finance, the couple's probability of investing went up by nine percentage points. 

"To design effective policies that aim to improve household welfare, we first need to understand why households make financial decisions that are sometimes less than optimal," Ke told The Academic Times. "We need to investigate potential determinants of their financial decisions. Traditional gender norms are one such determinant that I explore in this paper."

In the experimental part of Ke's study, nearly 4,000 straight respondents took an online test of how they would handle a financial decision: Would they buy company stock at a discount if they were allowed to immediately sell it for a profit? More men said they would invest than women — 77% compared to 73%. 

People who said they wanted to invest were presented with another scenario: If their spouse didn't want to buy the stock, would they try to convince them to buy it? Only 59% of women who hadn't been primed with a thought exercise about exhibiting "female" traits said they would contradict their husbands; 53% of women who were primed with the thought exercise contradicted their husbands. Even controlling for self-reported confidence, a woman who carried out the gendered thought exercise was less likely to tell her husband that he was making a financial mistake.

Previous financial scholarship has largely ignored in-household dynamics, including gender dynamics. 

"In most of the empirical studies on household behavior, for simplicity, the common practice is to use one household member's characteristics," such as age, race and education, Ke said. But his work demonstrated that variation between households is clearly affected by dynamics within the household.

Ke wanted to investigate gender in financial decisions because of his own personal data point: growing up as the son of a male reporter and a female employee for the tax bureau. 

"I was born and raised in a traditional Chinese family," he said. "While my mother is obviously much more financially sophisticated, my father has the final say on every important household financial decision," such as whether to invest in the stock market and whether to take out a mortgage, among other decisions.

"Reflecting on the various decisions my father made for the family," Ke said, "I couldn't help but think: What if my mother, who is more financially savvy, had a stronger voice?"

The study, "Who Wears the Pants? Gender Identity Norms and Intrahousehold Financial Decision‐Making," published Feb. 2 in the Journal of Finance, was authored by Da Ke, University of South Carolina.

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