Diversity, Equity, and Inclusion

49 Pages Posted: 8 May 2023 Last revised: 22 May 2023

See all articles by Alex Edmans

Alex Edmans

London Business School - Institute of Finance and Accounting; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Caroline Flammer

Columbia University; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Simon Glossner

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: May 2023

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.

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Suggested Citation

Edmans, Alex and Flammer, Caroline and Glossner, Simon, Diversity, Equity, and Inclusion (May 2023). NBER Working Paper No. w31215, Available at SSRN: https://ssrn.com/abstract=4440710

Alex Edmans (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

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Caroline Flammer

Columbia University ( email )

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Simon Glossner

Board of Governors of the Federal Reserve System ( email )

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