Do LGBT-Supportive Corporate Policies Improve Credit Ratings?: An Instrumental-Variable Analysis
33 Pages Posted: 9 Sep 2018
Date Written: August 28, 2018
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: Suggested Citation