Research from UNH Paul College reveals intriguing insights into the relationship between corporate diversity, equity, and inclusion (DEI) initiatives and stock prices during different U.S. presidencies.
The Study
In a study published in the Journal of Business Research, Inchan Kim, an assistant professor of business administration at Paul College, and his former research assistant Brandon McNeil '20, investigated the stock prices of Fortune 1000 financial services firms when supporting DEI initiatives for LGBT groups and military veterans during the presidencies of Barack Obama and Donald Trump.
Their investigation included analyzing and categorizing tweets from Fortune 1000 financial services firms, using AI to identify DEI initiatives for veterans and LGBT groups. Additionally, the researchers calculated cumulative abnormal returns (CARs) to measure the impact on stock prices, focusing on the last 500 days of Obama's presidency and the first 500 days of Trump's presidency.
Key Findings
- DEI initiatives supporting LGBT groups corresponded with higher stock returns during Trump's presidency compared to Obama's presidency.
- Conversely, DEI initiatives aimed at veterans generated higher stock returns during Obama's presidency compared to Trump's presidency.
While the first two findings partially confirmed Kim's initial hypothesis, there were also some unexpected outcomes:
- DEI initiatives for LGBT groups during Obama's administration resulted in negative stock price reactions.
- DEI initiatives for veterans during Trump's administration showed little stock price change.
Conclusion and Business Implications
Kim says his research shows:
- Companies should continue investing in DEI initiatives.
- Awareness of which social groups are perceived to lack political support is crucial.
- Helping social groups when their liberties are under attack can lead to financial rewards in stock prices.
- Understanding when DEI doesn't help financial situations is equally important.
"Companies can't thrive without engaging in socially responsible issues," says Kim. "I think they just have to be smart about it. If they don't, they will likely face a competitive disadvantage."
Read the full story at UNH Today.
