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LGBT CEOs and stock returns: Diagnosing rainbow ceilings and cliffs

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  • Shanaev, Savva
  • Skorochodova, Arina
  • Vasenin, Mikhail

Abstract

This study is the first to investigate the implications of lesbian, gay, bisexual, and transgender chief executive officers (LGBT CEOs) for stock performance, using an exhaustive sample of 26 LGBT publicly listed company CEOs since 2000. Firms with openly LGBT CEOs generate a statistically and economically significant monthly alpha of 0.69%− 1.08%, robust to portfolio weighting schemes, estimation frequency, multi-factor asset-pricing models, multicollinearity, sectoral allocation effects, and in subsamples in the United States and globally. The results imply that a “rainbow ceiling” exists with regards to LGBT executives, and that companies they lead are persistently undervalued due to discrimination by investors. LGBT CEOs on average represent small growth stocks with poor past performance, supporting the “rainbow cliff” hypothesis that the LGBT community is overrepresented in precarious leadership positions. Portfolios formed of stocks with LGBT CEOs robustly outperform broad market indices, evidencing attractiveness for ethical investment from both selfish and social perspectives.

Suggested Citation

  • Shanaev, Savva & Skorochodova, Arina & Vasenin, Mikhail, 2023. "LGBT CEOs and stock returns: Diagnosing rainbow ceilings and cliffs," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001897
    DOI: 10.1016/j.ribaf.2023.102063
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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