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

Abstract

Purpose

The 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/approach

The authors execute a regression analysis and several other robustness checks including propensity score matching (PSM) and an instrumental-variable analysis to mitigate endogeneity.

Findings

The 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/value

The 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.

Citation

Padungsaksawasdi, C., Treepongkaruna, S. and Jiraporn, P. (2023), "LGBT-supportive corporate policies, risk aversion and mitigation and economic policy uncertainty", Review of Behavioral Finance, Vol. 15 No. 2, pp. 240-256. https://doi.org/10.1108/RBF-10-2021-0211