Do LGBT-Supportive Corporate Policies Improve Credit Ratings? An Instrumental-Variable Analysis

Pandej Chintrakarn (), Sirimon Treepongkaruna (), Pornsit Jiraporn () and Sang Mook Lee ()
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Pandej Chintrakarn: Mahidol University International College (MUIC)
Sirimon Treepongkaruna: The University of Western Australia
Pornsit Jiraporn: Pennsylvania State University
Sang Mook Lee: Pennsylvania State University

Journal of Business Ethics, 2020, vol. 162, issue 1, No 3, 45 pages

Abstract: Abstract We investigate the effect of Lesbian, Gay, Bisexual, and Transgender (LGBT)-supportive corporate policies on credit ratings. To the extent that LGBT-friendly policies are beneficial to the firm and therefore improve its expected cash flows, credit rating agencies should assign more favorable credit ratings to the firm. To alleviate endogeneity concerns, we exploit the variations in the LGBT populations across the states in the U.S. as our instrument. Our instrumental-variable (IV) analysis reveals that firms that adopt LGBT-supportive corporate policies enjoy better credit ratings, supporting the stakeholder and good management hypothesis. Further analysis using propensity score matching also yields consistent results.

Keywords: LGBT-supportive; Credit ratings; Corporate social responsibility; CSR (search for similar items in EconPapers)
JEL-codes: G30 G31 M14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s10551-018-4009-9

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