Does Greater Diversity in Executive Race/Ethnicity Reliably Predict Better Future Firm Financial Performance?

31 Pages Posted: 28 Sep 2023 Last revised: 11 Dec 2023

See all articles by Y Sekou Bermiss

Y Sekou Bermiss

U of North Carolina at Chapel Hill

Jeremiah Green

Texas A&M University - Department of Accounting

John R. M. Hand

University of North Carolina Kenan-Flagler Business School

Date Written: November 15, 2023

Abstract

In contrast to the equivocal findings in academic research, “the business case for diversity” is the dominant rhetorical paradigm for how U.S. corporations debate actions and policies around racial/ethnic diversity. In this paper, we conduct an empirical test of the paradigm by gathering data on the race/ethnicity of the individuals shown on the leadership pages of S&P 500 firms’ websites as of mid-2011, 2014, 2017, 2020 and 2021, and then determining if any of nine measures of the racial/ethnic diversity of these executives reliably predict cross-sectional variation in any of six measures of their firms’ financial performance over the next fiscal year. We do not find reliable evidence that they do. As such, our results do not support the “business case for diversity” when the claim is assessed using 1-year-ahead financial performance metrics and multiple measures of the race/ethnicity of S&P 500 executives over the last decade.

Keywords: Executive diversity, race/ethnicity, firm financial performance

JEL Classification: J01, J15, J29, J71, M12

Suggested Citation

Bermiss, Yerodin Sekou and Green, Jeremiah and Hand, John R. M., Does Greater Diversity in Executive Race/Ethnicity Reliably Predict Better Future Firm Financial Performance? (November 15, 2023). Kenan Institute of Private Enterprise Research Paper No. 4576173, Available at SSRN: https://ssrn.com/abstract=4576173 or http://dx.doi.org/10.2139/ssrn.4576173

Yerodin Sekou Bermiss

U of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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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