Diversity, equity and inclusion is not bad for business: evidence from employee review data for companies listed in the UK and the US

Teresa Almeida, Yehuda Dayan, Helen Krause, Grace Lordan and Andreas Theodoulou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Diversity, equity and inclusion (DEI) is a growing strategic focus area. However, measuring DEI remains a challenge, partly due to self-reporting biases and limitations of cross-sectional survey data. This paper proposes a novel measure of DEI using a data set of online employee reviews that encompasses more than 3.2 million reviews posted between 2015 and 2022 on the career intelligence website Glassdoor. We investigate the relationship between this measure of DEI and firm performance for 945 US and UK-listed firms. We find that DEI is associated with higher long-term market performance, with positive impacts larger for growth compared to steady state firms, but not short-term market performance. We find evidence of a mixed relationship between DEI and accounting performance, and a consistent positive relationship with higher innovation. Finally, we examine the interaction between firm DEI and senior management diversity, with results indicating that the positive effects of DEI on long-term market performance and innovation are amplified in firms with higher levels of ethnic diversity in senior management. Overall, we conclude that DEI has either a positive or neutral association with firm performance.

JEL-codes: J01 L81 R14 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2024-10
New Economics Papers: this item is included in nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:129444

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