Do Diversity and Inclusion Words in 10-Ks Reflect Corporate Value?

Abstract

Some previous studies have found that diversity efforts have a positive impact on corporate value. This study examines whether the diversity words mentioned in Management’s Discussion and Analysis, Item 7 of 10-Ks filed with the Securities and Exchange Commission of the U.S. can indicate greater corporate value. One prior study found that diversity words count from Item 7 are significantly correlated with diversity measures/ratings constructed by outside entities. Somewhat surprisingly, we find the diversity word count is negative and significant when included in a regression model of corporate value, as measured by Tobin’s q.