Workforce diversity and shareholder value: a multi-level perspective

Workforce diversity and shareholder value: a multi-level perspective 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Workforce diversity and shareholder value: a multi-level perspective

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0403-7
Publisher site
See Article on Publisher Site

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.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 27, 2013

References

  • Mentoring and diversity
    Athey, S; Avery, C; Zemsky, P

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