How do different LGBTQ-friendly policies affect firm performance : An Empirical Study of U.S. Companies from 2005 to 2019

The LGBTQ community refers to lesbian, gay, bisexual, transgender, and queer people. The controversy surrounding sexual minorities never ends. Academic research on the LGBTQ community has gone through three stages, with early research on sexual minorities being studied as a disease and subsequent research examining negative attitudes toward the LGBTQ community. Currently, scholars focus on the relationship between institutions and LGBTQ. As society becomes more liberal, acceptance of the LGBTQ community increases and more and more people support the LGBTQ community's fight for equal rights with heterosexuals. In this liberal culture, companies adopting LGBTQ-friendly policies take social responsibility. These companies that adopt LGBTQ-friendly policies try to create an equal work environment internally. Externally, companies demonstrate their pursuit of diversity and equality to their stakeholders. Based on corporate social responsibility theory and stakeholder theory, this paper examines the relationship between firms' adoption of LGBTQ-friendly policies and firm performance through empirical regressions. This study aims to examine which LGBTQ policies have the most significant impact on firm performance. And how these policies work, i.e., whether they improve firm performance by increasing productivity or by attracting outside investment. This paper uses the Corporate Equality Index for U.S. public companies from 2005 to 2019 and financial data for the empirical study. The CEI comes from the Human Rights Fund Committee, and the financial data are all from Reuters. Corporate LGBTQ friendliness is measured by CEI data in four areas: equal employment opportunity, inclusion benefits, LGBTQ diversity committee, and public commitment. Financial performance is measured by Tobin's Q, ROA, factor productivity, and employee productivity. The empirical results of the study indicate that more LGBTQ-friendly firms have higher stock market valuations and profitability but have lower factor productivity and employee productivity. This positive impact is magnified in open states, influenced by less religious and more liberal social norms, while the negative impact is magnified in more conservative states. Of the four policies that make up the CEI index, public commitment is the most influential LGBTQ-friendly policy.