Market Perception of Diversity, Equity, and Inclusion (DEI) Rollbacks of U.S Public Firms
DOI:
https://doi.org/10.47941/ijecop.4086Keywords:
Diversity, Equity and Inclusion, Corporate Governance, Event Study, Firm ValueAbstract
Purpose: The rollback of diversity, equity, and inclusion (DEI) initiatives among publicly traded United States firms has raised concerns regarding investor confidence and corporate valuation. This study examined stock market perceptions of DEI rollbacks and their implications for shareholder wealth.
Methodology: The study employed a quantitative event study methodology involving 20 publicly traded United States firms that announced DEI policy rollbacks. Daily stock returns were analyzed using a mean-adjusted model, with expected returns estimated from 250 preceding trading days. Cumulative abnormal returns (CAR) were calculated over a seven-day event window (-3, +3) surrounding each announcement.
Findings: The findings revealed negative average cumulative abnormal returns throughout the event window, ranging from -1.02% to -1.98%, with an average CAR of -1.66% by day +3. These findings suggest an unfavorable market reaction to DEI rollbacks, although broader market movements and pre-announcement effects cannot be excluded.
Unique Contribution to Theory, Practice and Policy: The study recommends that corporate managers carefully evaluate the financial and reputational implications of reversing DEI commitments, strengthen stakeholder communication, and incorporate investor expectations into governance decisions. Future research should employ market-adjusted benchmarks and larger samples to establish more robust evidence concerning the valuation consequences of DEI policy changes.
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