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Do LGBT-Supportive Corporate Policies Improve Credit Ratings? An Instrumental-Variable Analysis

Author

Listed:
  • Pandej Chintrakarn

    (Mahidol University International College (MUIC))

  • Sirimon Treepongkaruna

    (The University of Western Australia)

  • Pornsit Jiraporn

    (Pennsylvania State University)

  • Sang Mook Lee

    (Pennsylvania State University)

Abstract

We investigate the effect of Lesbian, Gay, Bisexual, and Transgender (LGBT)-supportive corporate policies on credit ratings. To the extent that LGBT-friendly policies are beneficial to the firm and therefore improve its expected cash flows, credit rating agencies should assign more favorable credit ratings to the firm. To alleviate endogeneity concerns, we exploit the variations in the LGBT populations across the states in the U.S. as our instrument. Our instrumental-variable (IV) analysis reveals that firms that adopt LGBT-supportive corporate policies enjoy better credit ratings, supporting the stakeholder and good management hypothesis. Further analysis using propensity score matching also yields consistent results.

Suggested Citation

  • Pandej Chintrakarn & Sirimon Treepongkaruna & Pornsit Jiraporn & Sang Mook Lee, 2020. "Do LGBT-Supportive Corporate Policies Improve Credit Ratings? An Instrumental-Variable Analysis," Journal of Business Ethics, Springer, vol. 162(1), pages 31-45, February.
    • Handle: RePEc:kap:jbuset:v:162:y:2020:i:1:d:10.1007_s10551-018-4009-9
    DOI: 10.1007/s10551-018-4009-9
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    4. Do, Hung X. & Nguyen, Lily & Nguyen, Nhut H. & Nguyen, Quan M.P., 2022. "LGBT policy, investor trading behavior, and return comovement," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 457-483.
    5. Jaspreet Kaur & Madhu Vij & Ajay Kumar Chauhan, 2023. "Signals influencing corporate credit ratings—a systematic literature review," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 50(1), pages 91-114, March.
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    More about this item

    Keywords

    LGBT-supportive; Credit ratings; Corporate social responsibility; CSR;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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