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Journal of Accounting Research Vol. 62 No. 5 2024

Diversity Washing

Andrew C. Baker1; David F. Larcker2,3,4; Charles McClure5; Durgesh Saraph6; Edward M. Watts7

1 Berkeley Law School · 2 Graduate School of Business, Stanford University · 3 Hoover Institution · 4 European Corporate Governance Institute (ECGI) · 5 Booth School of Business The University of Chicago · 6 Independent Scholar · 7 Yale School of Management

open access

Abstract

We provide large‐sample evidence on whether U.S. publicly traded corporations use voluntary disclosures about their commitments to employee diversity opportunistically. We document significant discrepancies between companies' external stances on diversity, equity, and inclusion (DEI) and their hiring practices. Firms that discuss DEI excessively relative to their actual employee gender and racial diversity (“diversity washers”) obtain superior scores from environmental, social, and governance (ESG) rating organizations and attract more investment from institutional investors with an ESG focus. These outcomes occur even though diversity‐washing firms are more likely to incur discrimination violations and have negative human‐capital‐related news events. Our study provides evidence consistent with growing allegations of misleading statements from firms about their DEI initiatives and highlights the potential consequences of selective ESG disclosures.

DOI
10.1111/1475-679x.12542
Volume
62
Issue
5
Pages
1661-1709
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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