Do Corporate Diversity Initiatives Affect Profits and Returns

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Slater, Stanley F.
Zwirlein, Thomas J.
Weigand, Robert A.
Washburn University. School of Business
Kaw Valley Bank
Issue Date
August 2006
Alternative Title
We investigate the financial performance of firms that cultivate diversity in the workforce and develop relationships with other diverse stakeholders, using a wide variety of accounting, financial and market-based metrics. We find that firms with exemplary diversity records have a performance advantage over a matched set of peer firms, particularly in accounting-based profitability measures, but these advantages do not directly translate into gains for shareholders. the risk-adjusted excess returns of the diversity award-winners are virtually identical to the matching firms, and insignificantly different from zero. Our findings are consistent with the idea that diversity is a strategic initiative that provides firms with a competitive advantage, rather than just another aspect of firms' commitment to corporate social responsibility.