Abstract
The recent wave of same-sex marriage legalization marks the most significant human rights progress in decades. Nevertheless, the valuation effects on corporate America are unclear. While the arguments supporting marriage equality are largely in the domain of law and sociology, many prominent business leaders are actively engaged in campaigns advocating marriage equality. This suggests that the LGBT civil rights movement of our generation might have valuation implications for corporate America beyond human rights equality. This paper investigates the market perception of state-level same-sex marriage legalization by examining the short-window market reactions to firms headquartered in a state. We find positive market reactions to firms headquartered in states that legally recognize marriage equality. Further, we find that the market views companies more favorably in: (1) first-mover states before the Supreme Court ruling of United States v. Windsor, and (2) states that have stronger anti-discrimination laws for the LGBT community. Our findings complement prior research that focuses on the economic consequences of firm-level LGBT human rights policies by examining the state/nation-level legal impact, adding a new dimension to ethical practices that can have economic consequences.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
In June 2020, the U.S. Supreme Court ruled in another landmark case Bostock v. Clayton County that discrimination on the basis of sexual orientation and gender identity is prohibited under Title VII of the Civil Rights Act of 1964. Nevertheless, protection against discrimination beyond employment, such as housing, credit, education, etc., especially at the state level, is still likely to face harsh backlash.
For example, a discriminatory North Carolina law “led to a corporate boycott that, according to some estimates, could cost the state upwards of five billion dollars. PayPal canceled plans for a new operations center, Deutsche Bank nixed plans to expand in the state, and the N.B.A., N.C.A.A., and the A.C.C. all canceled plans to hold championship events there. Disney said that it would stop making movies in Georgia if the anti-LGBT bill became law. All of this was in line with what happened when Indiana faced a massive corporate boycott, including twelve conventions relocating away from the state, after it passed a so-called religious-freedom law” (The New Yorker 2016).
Rosenberg (2008) argued that court decisions could consolidate social change, but courts could not prompt social change. Judicially mandated social reform may incite anger over “outside interference” or “judicial activism”, and mobilize greater resistance than change accomplished through legislatures. For example, in 2010 opponents of marriage equality led a successful effort to block the reelection of three Iowa Supreme Court justices who had joined that court’s unanimous decision to recognize same-sex marriage under the state’s constitution.
As data for firms’ domestic partner benefits (DPB) from KLD database was discontinued after 2011, we do not have the data needed for all our periods to do the empirical analyses.
We thank an anonymous reviewer for this observation.
References
Amihud, Y. (2002). Illiquidity and stock returns: Cross-section and time-series effects. Journal of Financial Markets, 5(1), 31–56.
Armstrong, C. S., Barth, M. E., Jagolinzer, A. D., & Riedl, E. J. (2010). Market reaction to the adoption of IFRS in Europe. The Accounting Review, 85(1), 31–61.
Badgett, M. V. L., Durso, L. E., Kastanis, Mallory, C., & Kastanis, A. (2013). The business impact of LGBT-supportive workplace policies (pp. 1–37). Williams Institute, UCLA School of Law.
Badgett, M. V., Nezhad, S., Waaldijk, K., & van der Meulen Rodgers, Y. (2014). The relationship between LGBT inclusion and economic development: An analysis of emerging economies. The Williams Institute.
Becker, G. S. (2010). The economics of discrimination. University of Chicago press.
Briscoe, F., Chin, M. K., & Hambrick, D. C. (2014). CEO ideology as an element of the corporate opportunity structure for social activists. Academy of Management Journal, 57(6), 1786–1809.
Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33–53.
Chintrakarn, P., Treepongkauna, S., Jiraporn, P., & Lee, S. M. (2020). Do LGBT-supportive policies improve credit ratings? Journal of Business Ethics, 162, 31–45.
Daines, R. (2001). Does Delaware law improve firm value? Journal of Financial Economics, 62(3), 525–558.
De George, E. T., Li, X., & Shivakumar, L. (2016). A review of the IFRS adoption literature. Review of Accounting Studies, 21(3), 898–1004.
Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of Financial Economics, 49(3), 283–306.
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3–56.
Fama, E. F., & French, K. R. (2004). The capital asset pricing model: Theory and evidence. The Journal of Economic Perspectives, 18(3), 25–46.
Flores, A. R., & Barclay, S. (2016). Backlash, consensus, legitimacy, or polarization: The effect of same-sex marriage policy on mass attitudes. Political Research Quarterly, 69(1), 43–56.
Florida, R., & Mellander, C. (2010). There goes the metro: How and why bohemians, artists and gays affect regional housing values. Journal of Economic Geography, 10(2), 167–188.
Gao, H., & Zhang, W. (2016). Employment nondiscrimination acts and corporate innovation. Management Science, 63(9), 2982–2999.
Gormley, T. A., & Matsa, D. A. (2013). Common errors: How to (and not to) control for unobserved heterogeneity. The Review of Financial Studies, 27(2), 617–661.
Hou, K., Xue, C., & Zhang, L. (2015). Digesting anomalies: An investment approach. The Review of Financial Studies, 28(3), 650–705.
Jarrell, G. A., & Bradley, M. (1980). The economic effects of federal and state regulations of cash tender offers. The Journal of Law and Economics, 23(2), 371–407.
Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal of Finance, 48(1), 65–91.
Johnston, D., & Malina, M. A. (2008). Managing sexual orientation diversity: The impact on firm value. Group & Organization Management, 33(5), 602–625.
Joshi, S., & Li, Y. (2016). What is corporate sustainability and how do firms practice it? A Management Accounting Research Perspective. Journal of Management Accounting Research, 28(2), 1–11.
Li, F., & Nagar, V. (2013). Diversity and performance. Management Science, 59(3), 529–544.
Mayer, R. C., Warr, R. S., & Zhao, J. (2016). Does employee treatment and workforce diversity impact corporate innovative efficiency? Available at SSRN.
Miller, S. (2016). Employee benefits after the Supreme Court decision upholding same sex marriage. Society for Human Resource Management. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/same-sex-couples-benefits.aspx.
Miller, J. J., & Park, K. A. (2016). Same-sex marriage laws and demand for mortgage credit. Review of Economics of the Household. https://doi.org/10.1007/s11150-016-9356-7.
Ng, E., & Sears, G. (2020). Walking the talk on diversity: CEO beliefs, moral values, and the implementation of workplace diversity practices. Journal of Business Ethics, 164, 437–450.
Obergefell v. Hodges. Brief amici curiae of 379 employers and organizations representing employers filed. 05 Mar 2015. SCOTUSblog, http://sblog.s3.amazonaws.com/wp-content/uploads/2015/03/14-556tsac379EmployersandOrganizations.pdf. PDF download.
Page, S. (2007). The difference. . Princeton University Press.
Pichler, S., Blazovich, J. L., Cook, K. A., Huston, J. M., & Strawser, W. R. (2018). Do LGBT-supportive corporate policies enhance firm performance? Human Resource Management, 57(1), 263–278.
Ragins, B. R., Townsend, B., & Mattis, M. (1998). Gender gap in the executive suite: CEOs and female executives report on breaking the glass ceiling. Academy of Management Perspectives, 12(1), 28–42.
Richard, O. C. (2000). Racial diversity, business strategy, and firm performance: A resource-based view. Academy of Management Journal, 43(2), 164–177.
Rosenberg, G. N. (2008). The hollow hope: Can courts bring about social change? . University of Chicago Press.
Siegel, R. B. (2017). Same-sex marriage and backlash: Consensus, conflict, and constitutional culture. UCLA Law Review, 64, 1728.
Valenti, A. (2020). LGBT employment rights in an evolving legal landscape: The impact of the Supreme Court’s Decision in Bostock v. . Employee Responsibilities and Rights Journal. https://doi.org/10.1007/s10672-020-09359-7.
Wang, P., & Schwarz, J. L. (2010). Stock price reactions to GLBT nondiscrimination policies. Human Resource Management, 49(2), 195–216.
Webster, J. R., Adams, G. A., Maranto, C. L., Sawyer, K., & Thoroughgood, C. (2018). Workplace contextual supports for LGBT employees: A review, meta-analysis, and agenda for future research. Human Resource Management, 57(1), 193–210.
Acknowledgements
We thank Lee-Chin Institute CSR/Sustainability Research Grant for financial support; and valuable feedback from Diversity Section mid-year meeting Nov. 5, 2017, The Gender Equality Conference Nov. 16, 2017, and the 2018 CAAA Conference in Calgary. We take responsibility for any errors.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Appendices
Appendix 1
Event dates by year and state
Year | State | Event date | |
|---|---|---|---|
2003 | Massachusetts | November 18, 2003 | Judicial |
2008 | Connecticut | October 10, 2008 | Judicial |
2009 | Iowa | April 3, 2009 | Judicial |
Vermont | April 7, 2009 | Legislative | |
New Hampshire | June 3, 2009 | Legislative | |
District of Columbia | December 18, 2009 | Legislative | |
2011 | New York | June 24, 2011 | Legislative |
2012 | Maine | November 6, 2012 | Ballot |
Maryland | November 6, 2012 | Ballot | |
Washington | November 6, 2012 | Ballot | |
2013 | Rhode Island | May 2, 2013 | Legislative |
Delaware | May 7, 2013 | Legislative | |
Minnesota | May 14, 2013 | Legislative | |
California | June 26, 2013 | Judicial | |
New Jersey | September 27, 2013 | Judicial | |
Hawaii | November 13, 2013 | Legislative | |
Illinois | November 20, 2013 | Legislative | |
New Mexico | December 19, 2013 | Judicial | |
2014 | Oregon | May 19, 2014 | Judicial |
Pennsylvania | May 20, 2014 | Judicial | |
Indiana | October 6, 2014 | Judicial | |
Oklahoma | October 6, 2014 | Judicial | |
Utah | October 6, 2014 | Judicial | |
Virginia | October 6, 2014 | Judicial | |
Wisconsin | October 6, 2014 | Judicial | |
Colorado | October 7, 2014 | Judicial | |
Nevada | October 7, 2014 | Judicial | |
West Virginia | October 9, 2014 | Judicial | |
North Carolina | October 10, 2014 | Judicial | |
Alaska | October 12, 2014 | Judicial | |
Idaho | October 15, 2014 | Judicial | |
Arizona | October 17, 2014 | Judicial | |
Wyoming | October 21, 2014 | Judicial | |
Kansas | November 12, 2014 | Judicial | |
Montana | November 19, 2014 | Judicial | |
South Carolina | November 20, 2014 | Judicial | |
2015 | Florida | January 6, 2015 | Judicial |
Alabama | February 9, 2015 | Judicial | |
Nebraska | June 26, 2015 | Judicial | |
Arkansas | June 26, 2015 | Judicial | |
Georgia | June 26, 2015 | Judicial | |
Kentucky | June 26, 2015 | Judicial | |
Louisiana | June 26, 2015 | Judicial | |
Michigan | June 26, 2015 | Judicial | |
Mississippi | June 26, 2015 | Judicial | |
Missouri | June 26, 2015 | Judicial | |
North Dakota | June 26, 2015 | Judicial | |
Ohio | June 26, 2015 | Judicial | |
South Dakota | June 26, 2015 | Judicial | |
Tennessee | June 26, 2015 | Judicial | |
Texas | June 26, 2015 | Judicial |
Appendix 2
Defense of Marriage Act
The text of the bill below is as of Sep 10, 1996 (Passed Congress/Enrolled Bill).
H.R.3396
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To define and protect the institution of marriage.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
Section 1: Short Title
This Act may be cited as the ‘Defense of Marriage Act’.
Sec. 2: Powers Reserved to the States
(a) IN GENERAL—Chapter 115 of title 28, United States Code, is amended by adding after section 1738B the following:
‘Sec. 1738C. Certain acts, records, and proceedings and the effect thereof
‘No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.’.
(b) CLERICAL AMENDMENT—The table of sections at the beginning of chapter 115 of title 28, United States Code, is amended by inserting after the item relating to section 1738B the following new item:
‘1738C. Certain acts, records, and proceedings and the effect thereof.’.
Sec. 3: Definition of Marriage
(a) IN GENERAL—Chapter 1 of title 1, United States Code, is amended by adding at the end the following:
‘Sec. 7. Definition of ‘marriage’ and ‘spouse’
‘In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.’.
(b) CLERICAL AMENDMENT—The table of sections at the beginning of chapter 1 of title 1, United States Code, is amended by inserting after the item relating to section 6 the following new item:
‘7. Definition of ‘marriage’ and ‘spouse’.’.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
Appendix 3
SEI Scorecard and State Scores
High Priority to Achieve Basic Equality (Score = 1)
In these states, advocates focus on raising support for basic equality for LGBT people, such as non-discrimination laws, work toward equality may focus on passing municipal protections for LGBT people or opposing negative legislation which would undermine LGBT equality.
Building Equality (Score = 2)
In these states, advocates work to build upon initial advances toward LGBT equality, such as the passage of a safe schools law and basic non-discrimination protections. Work in these states varies widely but may focus on opposing negative legislation, passing comprehensive non-discrimination, or creating recognition of LGBT families.
Solidifying Equality (Score = 3)
These states generally have several basic measures of equality including non-discrimination protections. Advocates work to ensure the broad implementation of these laws while advancing laws concerning parenting, youth, health, and safety to achieve full equality for the LGBT community.
Working Toward Innovative Equality (Score = 4)
These states have a broad range of protections to ensure equality for LGBT people, including comprehensive non-discrimination laws, safe schools laws, and advances in transgender healthcare. Advocates focus on implementation of laws and work toward innovative legislation that addresses the needs of vulnerable LGBT communities.
State Equality Index (SEI) by State
State | Abbr | SEI |
|---|---|---|
Alabama | AL | 1 |
Alaska | AK | 1 |
Arizona | AZ | 1 |
Arkansas | AR | 1 |
California | CA | 4 |
Colorado | CO | 4 |
Connecticut | CT | 4 |
Delaware | DE | 3 |
Florida | FL | 1 |
Georgia | GA | 1 |
Hawaii | HI | 2 |
Idaho | ID | 1 |
Illinois | IL | 4 |
Indiana | IN | 1 |
Iowa | IA | 3 |
Kansas | KS | 1 |
Kentucky | KY | 1 |
Louisiana | LA | 1 |
Maine | ME | 3 |
Maryland | MD | 2 |
Massachusetts | MA | 3 |
Michigan | MI | 1 |
Minnesota | MN | 2 |
Mississippi | MS | 1 |
Missouri | MO | 1 |
Montana | MT | 1 |
Nebraska | NE | 1 |
Nevada | NV | 2 |
New Hampshire | NH | 2 |
New Jersey | NJ | 3 |
New Mexico | NM | 2 |
New York | NY | 3 |
North Carolina | NC | 1 |
North Dakota | ND | 1 |
Ohio | OH | 1 |
Oklahoma | OK | 1 |
Oregon | OR | 4 |
Pennsylvania | PA | 1 |
Rhode Island | RI | 2 |
South Carolina | SC | 1 |
South Dakota | SD | 1 |
Tennessee | TN | 1 |
Texas | TX | 1 |
Utah | UT | 2 |
Vermont | VT | 3 |
Virginia | VA | 1 |
Washington | WA | 4 |
West Virginia | WV | 1 |
Wisconsin | WI | 2 |
Wyoming | WY | 1 |
District of Columbia | DC | 4 |
Rights and permissions
About this article
Cite this article
Zhu, J.Y., Smieliauskas, W. Evidence on the Economic Consequences of Marriage Equality and LGBT Human Rights. J Bus Ethics 178, 57–70 (2022). https://doi.org/10.1007/s10551-021-04802-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-021-04802-7