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Workforce diversity and shareholder value: a multi-level perspective

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  • Kimberly Ellis
  • Phyllis Keys

Abstract

Our study examines the effects of the racial diversity of a firm’s workforce on shareholder value. We show that the disclosure of racial diversity in firms yields significant, positive abnormal returns. We further test the effects of several indicators of both lower-level and upper-level workforce diversity in explaining variations in abnormal returns. Our results indicate that two measures of lower-level diversity, workforce heterogeneity and percent of minority new hires, and one measure of upper-level diversity, percent of minorities among the firm’s top paid executives, are significantly related to shareholder value. Also, research expenditures, is an important driver of shareholder value in diverse firms. Moreover, workforce heterogeneity is more essential to creating shareholder value in service firms where there is more direct interaction with end-user customers. Thus, consistent with arguments related to the resource-based view and the innovation hypothesis, our study provides empirical support that firms benefit from developing a racially diverse workforce at multiple levels within the organization. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Kimberly Ellis & Phyllis Keys, 2015. "Workforce diversity and shareholder value: a multi-level perspective," Review of Quantitative Finance and Accounting, Springer, vol. 44(2), pages 191-212, February.
  • Handle: RePEc:kap:rqfnac:v:44:y:2015:i:2:p:191-212
    DOI: 10.1007/s11156-013-0403-7
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    References listed on IDEAS

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    7. Brian L. Goff & Robert E. McCormick & Robert D. Tollison, 2002. "Racial Integration as an Innovation: Empirical Evidence from Sports Leagues," American Economic Review, American Economic Association, vol. 92(1), pages 16-26, March.
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    Cited by:

    1. Asad, Muhammad & Akbar, Saeed & Li, Jing & Shah, Syed Zulfiqar Ali, 2023. "Board diversity and corporate propensity to R&D spending," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Jian Cao & Kimberly M. Ellis & Mingxiang Li, 2019. "Inside the board room: the influence of nationality and cultural diversity on cross-border merger and acquisition outcomes," Review of Quantitative Finance and Accounting, Springer, vol. 53(4), pages 1031-1068, November.
    3. Filbeck, Greg & Foster, Benjamin & Preece, Dianna & Zhao, Xin, 2017. "Does diversity improve profits and shareholder returns? Evidence from top rated companies for diversity by DiversityInc," Advances in accounting, Elsevier, vol. 37(C), pages 94-102.
    4. Mika Ylinen & Mikko Ranta, 2024. "Employer ratings in social media and firm performance: Evidence from an explainable machine learning approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 247-276, March.

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    More about this item

    Keywords

    Workforce diversity; Shareholder value; Multi-level analysis; J15; G14; L20;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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