Margaret Neale, a professor of organizational behavior at Stanford Graduate School of Business, and two of her PhD students examined whether investors care about gender diversity. They intend to prove causation rather than simple correlation.
The team analyzed the reactions of shareholders to gender diversity announcements of public companies in the finance and technology industries between 2014 and 2018. They found that stock prices rose when a company reported a positive gender diversity, particularly if it was better than the industry leader. The results were the same for both the finance and tech sectors. Neale said that shareholders are likely saying that there will be economic consequences if a corporation is not as diverse as they want it to be.
According to David Daniels, a co-author of the study and assistant management professor at the Hong Kong University of Science and Technology, the findings indicate that investors or shareholders care about the levels of diversity, not only about the act of releasing diversity report.
The researchers also conducted an experiment to determine the diversity beliefs of almost 400 managers in different industries. They found that the managers are more likely to invest in a diverse company if the company believed that doing so was ethical. The participants believed that diverse companies tend to have fewer personality conflicts, more creative employees and are less likely to settle lawsuits out of court.