IDEAS home Printed from https://ideas.repec.org/a/eee/advacc/v53y2021ics088261102100016x.html
   My bibliography  Save this article

Noteworthy diversity efforts and financial performance: Evidence from DiversityInc's top 50

Author

Listed:
  • Foster, Benjamin P.
  • Manikas, Andrew
  • Preece, Dianna
  • Kroes, James R.

Abstract

This study provides evidence that diversity efforts are associated with improved organizational performance. We explore the benefits of diversity by analyzing long-term shareholder value (Tobin's q) and short-term performance (return on assets) of companies cited for being leaders in the area of diversity. Tobin's q is significantly higher for companies included on the DiversityInc Top 50 list than other companies, implying that diversity efforts increase long-term shareholder value. Companies on a DiversityInc list also have significantly better short-term financial performance, return on assets, than similar companies in their industry. We also conduct a Granger causation analysis, and the results are consistent with our interpretation that appearance on the DiversityInc list increases Tobin's q. Our study contributes to the literature by comparing companies notably recognized for diversity efforts to companies not recognized, and examining the long-term benefits of those efforts.

Suggested Citation

  • Foster, Benjamin P. & Manikas, Andrew & Preece, Dianna & Kroes, James R., 2021. "Noteworthy diversity efforts and financial performance: Evidence from DiversityInc's top 50," Advances in accounting, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:advacc:v:53:y:2021:i:c:s088261102100016x
    DOI: 10.1016/j.adiac.2021.100528
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S088261102100016X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.adiac.2021.100528?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Greg Filbeck & Dianna Preece, 2003. ""Fortune's" Best 100 Companies to Work for in America: Do They Work for Shareholders?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5-6), pages 771-797.
    2. Mark Lang & Karl V. Lins & Mark Maffett, 2012. "Transparency, Liquidity, and Valuation: International Evidence on When Transparency Matters Most," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 729-774, June.
    3. Ning Zhang, 2016. "The effects of anticipated future investments on firm value: evidence from mergers and acquisitions," Review of Accounting Studies, Springer, vol. 21(2), pages 516-558, June.
    4. Manikas, Andrew S. & Patel, Pankaj C., 2016. "Managing sales surprise: The role of operational slack and volume flexibility," International Journal of Production Economics, Elsevier, vol. 179(C), pages 101-116.
    5. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
    6. Jeong†Bon Kim & Richard Chung & Michael Firth, 2003. "Auditor Conservatism, Asymmetric Monitoring, and Earnings Management," Contemporary Accounting Research, John Wiley & Sons, vol. 20(2), pages 323-359, June.
    7. 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.
    8. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    9. Michael Ryngaert & Shawn Thomas, 2012. "Not All Related Party Transactions (RPTs) Are the Same: Ex Ante Versus Ex Post RPTs," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 845-882, June.
    10. Letian Zhang, 2020. "An Institutional Approach to Gender Diversity and Firm Performance," Organization Science, INFORMS, vol. 31(2), pages 439-457, March.
    11. Scott D. Julian & Joseph C. Ofori-Dankwa, 2017. "Context matters: Diversity's short- and long-term effects in fortune's “best companies to work for”," Strategic Management Journal, Wiley Blackwell, vol. 38(7), pages 1557-1565, July.
    12. David A. Carter & Betty J. Simkins & W. Gary Simpson, 2003. "Corporate Governance, Board Diversity, and Firm Value," The Financial Review, Eastern Finance Association, vol. 38(1), pages 33-53, February.
    13. Gamze VURAL & Ahmet G khan S KMEN & Emin H seyin CETENAK, 2012. "Affects of Working Capital Management on Firm's Performance: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 488-495.
    14. Orlando C. Richard & B. P. S Murthi & Kiran Ismail, 2007. "The impact of racial diversity on intermediate and long‐term performance: The moderating role of environmental context," Strategic Management Journal, Wiley Blackwell, vol. 28(12), pages 1213-1233, December.
    15. G Tomas M Hult & David J Ketchen & David A Griffith & Brian R Chabowski & Mary K Hamman & Bernadine Johnson Dykes & Wesley A Pollitte & S Tamer Cavusgil, 2008. "An assessment of the measurement of performance in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(6), pages 1064-1080, September.
    16. Daehyun Kim & Laura T. Starks, 2016. "Gender Diversity on Corporate Boards: Do Women Contribute Unique Skills?," American Economic Review, American Economic Association, vol. 106(5), pages 267-271, May.
    17. Peggy M. Lee & Erika Hayes James, 2007. "She'‐e‐os: gender effects and investor reactions to the announcements of top executive appointments," Strategic Management Journal, Wiley Blackwell, vol. 28(3), pages 227-241, March.
    18. Hassan, Rohail & Marimuthu, Maran, 2018. "Contextualizing comprehensive board diversity and firm financial performance: Integrating market, management and shareholder’s perspective," Journal of Management & Organization, Cambridge University Press, vol. 24(5), pages 634-678, September.
    19. María del Carmen Triana & Toyah L. Miller & Tiffany M. Trzebiatowski, 2014. "The Double-Edged Nature of Board Gender Diversity: Diversity, Firm Performance, and the Power of Women Directors as Predictors of Strategic Change," Organization Science, INFORMS, vol. 25(2), pages 609-632, April.
    20. Patrick F. McKay & Derek R. Avery & Hui Liao & Mark A. Morris, 2011. "Does Diversity Climate Lead to Customer Satisfaction? It Depends on the Service Climate and Business Unit Demography," Organization Science, INFORMS, vol. 22(3), pages 788-803, June.
    21. Christopher F Baum, 2001. "Residual diagnostics for cross-section time series regression models," Stata Journal, StataCorp LP, vol. 1(1), pages 101-104, November.
    22. Green, T. Clifton & Jame, Russell & Markov, Stanimir & Subasi, Musa, 2014. "Broker-hosted investor conferences," Journal of Accounting and Economics, Elsevier, vol. 58(1), pages 142-166.
    23. Kenneth R. Ahern & Amy K. Dittmar, 2012. "The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 137-197.
    24. Lin, Chin-Sen & Su, Chao-Ton, 2013. "The Taiwan national quality award and market value of the firms: An empirical study," International Journal of Production Economics, Elsevier, vol. 144(1), pages 57-67.
    25. W. Robert Knechel & Ann Vanstraelen & Mikko Zerni, 2015. "Does the Identity of Engagement Partners Matter? An Analysis of Audit Partner Reporting Decisions," Contemporary Accounting Research, John Wiley & Sons, vol. 32(4), pages 1443-1478, December.
    26. Greg Filbeck & Dianna Preece, 2003. "Fortune’s Best 100 Companies to Work for in America: Do They Work for Shareholders?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5‐6), pages 771-797, June.
    27. Arun Upadhyay & Hongchao Zeng, 2017. "Cash holdings and the bargaining power of R&D-intensive targets," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 885-923, November.
    28. Tatiana Fedyk & Zvi Singer & Mark Soliman, 2017. "The sharpest tool in the shed: IPO financial statement management of STEM vs. non-STEM firms," Review of Accounting Studies, Springer, vol. 22(4), pages 1541-1581, December.
    29. Liwei Shan & Shihe Fu & Lu Zheng, 2017. "Corporate sexual equality and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 38(9), pages 1812-1826, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiajia Liu & Kexin Zhou & Ye Zhang & Fangcheng Tang, 2023. "The Effect of Financial Digital Transformation on Financial Performance: The Intermediary Effect of Information Symmetry and Operating Costs," Sustainability, MDPI, vol. 15(6), pages 1-22, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benjamin P. Foster & Andrew S. Manikas & James R. Kroes, 2023. "Which diversity measures best capture public company value?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(1), pages 236-247, January.
    2. Tanaka, Takanori, 2019. "Gender diversity on Japanese corporate boards," Journal of the Japanese and International Economies, Elsevier, vol. 51(C), pages 19-31.
    3. Wongsinhirun, Nopparat & Chatjuthamard, Pattanaporn & Jiraporn, Pornsit, 2023. "Corporate culture and board gender diversity: Evidence from textual analysis," International Review of Financial Analysis, Elsevier, vol. 86(C).
    4. Mi‐Hee Lim & Ji‐Hwan Lee, 2023. "How and when female directors effectively cut down acquisition premiums," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 84-101, January.
    5. Katia Furlotti & Tatiana Mazza & Veronica Tibiletti & Silvia Triani, 2019. "Women in top positions on boards of directors: Gender policies disclosed in Italian sustainability reporting," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(1), pages 57-70, January.
    6. Kroes, James R. & Manikas, Andrew S. & Gattiker, Thomas F., 2018. "Operational leanness and retail firm performance since 1980," International Journal of Production Economics, Elsevier, vol. 197(C), pages 262-274.
    7. Nguyen, Tuan & Nguyen, An & Nguyen, Mau & Truong, Thuyen, 2021. "Is national governance quality a key moderator of the boardroom gender diversity–firm performance relationship? International evidence from a multi-hierarchical analysis," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 370-390.
    8. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    9. Gambacorta, Leonardo & Pancotto, Livia & Reghezza, Alessio & Spaggiari, Martina, 2022. "Gender diversity in bank boardrooms and green lending: Evidence from euro area credit register data," CEPR Discussion Papers 17650, C.E.P.R. Discussion Papers.
    10. Olga Dodd & Bart Frijns & Robin Kaiji Gong & Shushu Liao, 2024. "Board cultural diversity and firm performance under competitive pressures," The Financial Review, Eastern Finance Association, vol. 59(1), pages 89-111, February.
    11. Nguyen, Thi Hong Hanh & Ntim, Collins G. & Malagila, John K., 2020. "Women on corporate boards and corporate financial and non-financial performance: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 71(C).
    12. Simona, Comi & Mara, Grasseni & Federica, Origo & Laura, Pagani, 2017. "Where Women Make The Difference. The Effects of Corporate Board Gender Quotas on Firms’ Performance across Europe," Working Papers 367, University of Milano-Bicocca, Department of Economics, revised 12 Jul 2017.
    13. Isabelle Solal & Kaisa Snellman, 2019. "Women Don’t Mean Business? Gender Penalty in Board Composition," Organization Science, INFORMS, vol. 30(6), pages 1270-1288, November.
    14. Sanjukta Brahma & Chioma Nwafor & Agyenim Boateng, 2021. "Board gender diversity and firm performance: The UK evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5704-5719, October.
    15. Mohsni, Sana & Otchere, Isaac & Shahriar, Saquib, 2021. "Board gender diversity, firm performance and risk-taking in developing countries: The moderating effect of culture," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    16. García Lara, Juan Manuel & García Osma, Beatriz & Mora, Araceli & Scapin, Mariano, 2017. "The monitoring role of female directors over accounting quality," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 651-668.
    17. Zeineb Ouni & Jamal Ben Mansour & Sana Arfaoui, 2022. "Corporate Governance and Financial Performance: The Interplay of Board Gender Diversity and Intellectual Capital," Sustainability, MDPI, vol. 14(22), pages 1-22, November.
    18. Sultan Sikandar Mirza & Muhammad Ansar Majeed & Tanveer Ahsan, 2020. "Board gender diversity, competitive pressure and investment efficiency in Chinese private firms," Post-Print hal-02956320, HAL.
    19. Field, Laura Casares & Souther, Matthew E. & Yore, Adam S., 2020. "At the table but can not break through the glass ceiling:Board leadership positions elude diverse directors," Journal of Financial Economics, Elsevier, vol. 137(3), pages 787-814.
    20. Usama Laique & Fahad Abdullah & Ijaz Ur Rehman & Bruno S. Sergi, 2023. "Two decades of research on board gender diversity and financial outcomes: Mapping heterogeneity and future research agenda," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2121-2144, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:advacc:v:53:y:2021:i:c:s088261102100016x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/advances-in-accounting/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.