LGBT-supportive corporate policies, risk aversion and mitigation and economic policy uncertainty

• Published in: Review of behavioral finance Vol. 15; no. 2; pp. 240 - 256
• Main Authors: Padungsaksawasdi, Chaiyuth, Treepongkaruna, Sirimon, Jiraporn, Pornsit
• Format: Journal Article
• Language: English
• Published: Leeds Emerald Publishing Limited 14.03.2023; Emerald Group Publishing Limited
• Subjects: Capital expenditures; Credit ratings; Economic policy; Economic theory; Generalized method of moments; Hypotheses; LGBTQ community; Personnel policies; Sexual orientation; Sustainability; Sustainability management; M14; Corporate social responsibility; Uncertainty; LGBT-friendly; Economic policy uncertainty; G32; LGBT-supportive; Risk mitigation
• ISSN: 1940-5979; 1940-5987
• DOI: 10.1108/RBF-10-2021-0211

PurposeThe paper aims to investigate the effect of uncertain times on LGBT-supportive corporate policies, exploiting a novel text-based measure of economic policy uncertainty (EPU) that was recently constructed by Baker et al. (2016). LGBT-supportive policies have attracted a great deal of attention in the media lately. There is also a rapidly growing area of the literature that addresses LGBT-supportive policies specifically.Design/methodology/approachThe authors execute a regression analysis and several other robustness checks including propensity score matching (PSM) and an instrumental-variable analysis to mitigate endogeneity.FindingsThe authors' results show that companies significantly raise their investments in LGBT-supportive policies in times of greater uncertainty, reinforcing the risk mitigation view where LGBT-supportive policies create moral capital with an insurance-like effect that mitigates adverse consequences during uncertain times. The effect of EPU on LGBT-supportive policies is above and beyond its effect on corporate social responsibility (CSR) in general.Originality/valueThe authors' study is the first to explore the effect of uncertain times on LGBT-supportive corporate policies. The authors contribute to a crucial area of the literature that examines how firms respond to EPU. In addition, the authors enrich the literature on LGBT-friendly policies by showing that EPU is one of the significant determinants of LGBT-friendly policies.