Premium
Do Diversity Reputation Signals Increase Share Value?
Author(s) -
Cook Alison,
Glass Christy
Publication year - 2014
Publication title -
human resource development quarterly
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.756
H-Index - 65
eISSN - 1532-1096
pISSN - 1044-8004
DOI - 10.1002/hrdq.21183
Subject(s) - diversity (politics) , reputation , value (mathematics) , test (biology) , resource (disambiguation) , human resources , business , event study , human resource management , accounting , gender diversity , marketing , public relations , economics , finance , management , corporate governance , political science , law , computer network , context (archaeology) , machine learning , computer science , paleontology , biology
This analysis contributes to the ongoing scholarly debate regarding the relationship between firms’ efforts to promote diversity and financial performance. Most research contributing to this debate focuses on specific efforts of firms, such as progressive human resource policies and leadership personnel changes, on firm‐level outcomes. Much less research focuses on the impact of reputational signals on performance. However, we argue that reputation signals may provide an even stronger test of the impact of diversity efforts on performance. We analyze the impact of diversity awards, which recognize companies at the forefront of progressive human resource policies, on share value. We use event study methodology to test hypotheses derived from signaling theory to predict investors’ reaction to the announcement of diversity awards. Overall, we find that diversity award recipients are rewarded for these efforts by a significant increase in share price. Our research lends support to the business case for diversity by demonstrating that investors interpret diversity reputation signals as contributing to firms’ financial value. Further implications of these findings for corporate decision makers, policy makers, and scholars are discussed.