Diversity Matters/Delivers/Wins Revisited in S&P 500® Firms

30 Pages Posted: 24 May 2021 Last revised: 9 Aug 2021

See all articles by Jeremiah Green

Jeremiah Green

Texas A&M University - Department of Accounting

John R. M. Hand

University of North Carolina Kenan-Flagler Business School

Date Written: August 6, 2021

Abstract

In a series of influential studies, McKinsey (2015, 2018, 2020) report a statistically significant positive relation between the industry-adjusted EBIT margin of global samples of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using recent data for US S&P 500® firms, we find statistically insignificant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity and not only industry-adjusted EBIT margin, but also industry-adjusted sales growth, gross margin, ROA, ROE, and TSR. Our results suggest that despite the imprimatur often given to McKinsey’s (2015, 2018, 2020) studies, caution is warranted in relying on their findings to support the view that US publicly traded firms can deliver improved financial performance if they increase the racial/ethnic diversity of their executives.

Suggested Citation

Green, Jeremiah and Hand, John R. M., Diversity Matters/Delivers/Wins Revisited in S&P 500® Firms (August 6, 2021). Available at SSRN: https://ssrn.com/abstract=3849562 or http://dx.doi.org/10.2139/ssrn.3849562

Jeremiah Green

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

John R. M. Hand (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3173 (Phone)
919-962-4727 (Fax)

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