Do LGBT-Supportive Corporate Policies Improve Credit Ratings?: An Instrumental-Variable Analysis

33 Pages Posted: 9 Sep 2018

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Sangmook Lee

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: August 28, 2018

Abstract

We investigate the effect of Lesbian, Gay, Bisexual and Transgender (LGBT)-supportive corporate policies on credit ratings. To the extent that LGBT-friendly policies are beneficial to the firm and therefore improve its expected cash flows, credit rating agencies should assign more favorable credit ratings to the firm. To alleviate endogeneity concerns, we exploit the variations in the LGBT populations across the states in the U.S. as our instrument. Our instrumental-variable (IV) analysis reveals that firms that adopt LGBT-supportive corporate policies enjoy significantly better credit ratings, supporting the stakeholder and good management hypothesis. Further analysis using propensity score matching also yields consistent results.

Keywords: LGBT, LGBT-Friendly, LGBT-Supportive, Credit Ratings, Corporate Social Responsibility, CSR

JEL Classification: G30, G31, M14

Suggested Citation

Chintrakarn, Pandej and Treepongkaruna, Sirimon and Jiraporn, Pornsit and Lee, Sangmook, Do LGBT-Supportive Corporate Policies Improve Credit Ratings?: An Instrumental-Variable Analysis (August 28, 2018). Available at SSRN: https://ssrn.com/abstract=3240082 or http://dx.doi.org/10.2139/ssrn.3240082

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Sangmook Lee

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

University Park
State College, PA 16802
United States

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