Trump election and minority CEO pessimism

Ethnic tension in the United States became more salient after Donald Trump’s election on November 9, 2016. Exploring the variation in management forecasts, we show that after the Trump election, minority CEOs exhibit more pessimism in their earnings forecasts (underestimation of the mean of earnings), compared with their non-minority counterparts. This tendency toward pessimism is observed across CEOs from various minority groups and is particularly pronounced in firms led by less experienced or less confident minority CEOs. Further analyses reveal that minority CEOs make less specific and less precise forecasts. Minority CEO pessimism is not explained by alternative explanations including terrorist attacks and minority CEOs’ political ideology. Collectively, our research provides evidence that the Trump election induces biased beliefs in the form of pessimism in ethnic minority CEOs.