Corporate Response to the Black Lives Matter Movement
We investigate determinants that encourage companies to speak out via twitter or their websites in support of Black Lives Matter (BLM) after the death of George Floyd on May 25, 2020. We find important determinants include prior investments in diversity and inclusion: BLM firms have more diverse boards, place greater emphasis on diversity in top executive compensation, have stronger shareholder rights, and better ESG scores for workforce inclusivity and training. Being part of supportive social networks is also an important determinant: BLM firms are headquartered in Democrat-leaning cities with more intense BLM protests, are in consumer- or tech-related industries, and are closely connected to each other via shared directors. Although increasing shareholder value is likely to be an important determinant for firms investing in equity and inclusion, we find no stock price reaction to speaking out on average. We do find a positive stock price reaction for tweets that go viral, suggesting investors view greater consumer attention as leading to higher future profits. We develop an inclusivity index and rank firms on their investments in equity and inclusion and show firms with higher scores are more likely to speak out on the Capitol Riots, the Asian Spa Shootings, voting rights, and legislation helping underrepresented groups including Dreamers and LGBTQ. Thus, when firms invest in equity and inclusion they are more likely to openly express support for social causes.
Co-Author(s): Patricia Dechow and Samuel T. Tan