LGBT discrimination and harassment, firm value, and reputation repair

This paper analyzes the market reaction to the reported discrimination against or harassment of LGBT stakeholders (i.e., employees and customers) using a unique hand-collected sample consisting of 167 events worldwide. The results show a negative and significant average effect following the announcement of an LGBT misconduct incident, with an around 0.5% abnormal decrease in market value over the event day and the next trading day. The average magnitude of impact is significantly lower after the #MeToo movement, suggesting that investors tend to be less indulgent regarding inappropriate behavior based on sexual orientation. We also find that firms experiencing a large negative magnitude of impact perform concrete corrective actions to repair their tarnished reputation.

Automated summary

This paper analyzes the market reaction to reported discrimination and harassment against LGBT stakeholders using a sample of 167 events worldwide. The results show that there is a significant negative impact on market value following the announcement of an LGBT misconduct incident, with a decrease of around 0.5% over the event day and the next trading day. The average impact is lower after the #MeToo movement, suggesting that investors are less tolerant of inappropriate behavior based on sexual orientation. Firms that experience a large negative impact take concrete corrective actions to repair their reputation.