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Pride pays as research shows that LGBT-friendly businesses are more profitable

LGBT‐friendly corporate policies pay off, and the documented positive relationship between LGBT friendliness and firm performance can be considered economically significant.

Photo by Jon Tyson from Unsplash.com

Businesses with LGBT‐friendly policies perform better, according to research from Aalto University School of Business and the University of Vaasa, and which was published in Accounting and Finance.

The research – conducted by Jukka Sihvonen, Veda Fatmy, John Kihn and Sami Vähämaa – specifically examined the association between LGBT‐friendly corporate policies and firm performance using data on 657 publicly traded US firms over the period 2003–2016. It found – as stated – that LGBT-friendly policies may create value for the firm. More specifically, the researchers found strong evidence that more LGBT‐friendly firms have higher profitability and higher stock market valuations.

“Our… findings demonstrate that LGBT‐friendly corporate policies pay off, and the documented positive relationship between LGBT friendliness and firm performance can be considered economically significant,” Sihvonen was quoted as saying in a press release.

While the results were positive as a whole, the findings nonetheless indicated that the positive effect of progressive LGBT policies on profitability and market valuation is more pronounced for firms located in more liberal locations, and – adversely – being weaker or non‐existent for firms located in more conservative locations.

Nevertheless, the researchers still found that even for firms located in more socially conservative locations, the effect of LGBT friendliness on firm performance is at worst neutral. This suggeste that the adoption of LBGT‐friendly policies does not generally have detrimental repercussions.

In explaining why LGBT friendliness influence firm performance, Sihvonen explained: “Previous studies have documented that LGBT‐friendly firms are associated with greater employee commitment, improved job satisfaction, increased employee productivity, and more altruistic workplace behavior.”

The researchers also said that LGBT‐friendly policies may improve competitiveness in the job market by fostering the firm’s ability to attract, recruit and retain talented employees.

In the end, the study’s findings should be considered “to support the view that socially progressive corporate policies and diversity management is worthwhile, and should be considered across the board.”

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