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Diversity, Equity, and Inclusion

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  • Edmans, Alex
  • Flammer, Caroline
  • Glossner, Simon

Abstract

This paper measures diversity, equity, and inclusion (DEI) using proprietary data on survey responses used to compile the Best Companies to Work For list. We identify 13 of the 58 questions as being related to DEI, and aggregate the responses to form our DEI measure. This variable has low correlation with gender and ethnic diversity in the boardroom, in senior management, and within the workforce, suggesting that DEI captures additional dimensions missing from traditional measures of demographic diversity. DEI is also unrelated to general workplace policies and practices, suggesting that DEI cannot be improved by generic initiatives. However, DEI is higher in small growth firms and firms with high financial strength. DEI is associated with higher future accounting performance across a range of measures, higher future earnings surprises, and higher valuation ratios, but demographic diversity is not. DEI perceptions among professional workers, such as R&D employees, are significantly correlated with the number and quality of patents. However, DEI exhibits no link with future stock returns.

Suggested Citation

  • Edmans, Alex & Flammer, Caroline & Glossner, Simon, 2023. "Diversity, Equity, and Inclusion," CEPR Discussion Papers 18137, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18137
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    Keywords

    ESG;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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