Exploring the impact of diversity, equity, and inclusion (DEI) on firm market performance

Abstract

This thesis investigates the impact of Diversity, Equity, and Inclusion (DEI) announcements within various contexts, employing a combination of Citation Network Analysis (CNA), Structural Topic Modeling (STM), and empirical analysis to provide a comprehensive understanding of DEI's role in organizational performance and market reactions. The first study utilizes a citation network analysis to explore DEI activities in the field of operations management at the workplace. By selecting relevant papers from Q1 publications using the Web of Science, and employing CitNetExplorer software, this study identifies six distinct clusters of DEI-related research. Through the application of STM, sub-topics within each cluster are further analyzed, revealing how these themes contribute to the broader DEI discourse. This research develops a conceptual framework that illustrates the interrelationships among the clusters, offering valuable insights into advancing DEI theory and guiding future research directions. The second study examines the effect of DEI commitment announcements on the market performance of publicly traded manufacturing firms in the United States, employing signaling theory. Analyzing 233 DEI announcements from 161 firms over a decade (2013-2022), the study finds that DEI announcements generally lead to positive abnormal stock returns, particularly when announcements emphasize DEI topics strongly (signal strength) and focus on specific DEI aspects (signal specificity). These findings suggest that DEI is not only a moral imperative but also a strategic tool that can enhance investor confidence and firm value. The study provides managerial implications for firms looking to leverage DEI for improved market performance. The third study shifts the focus to Taiwanese firms, exploring the impact of DEI announcements in a different cultural setting. Using data from the Wise News search engine, 197 DEI announcements were analyzed over four years (2020-2024). The study reveals that, unlike in the U.S., DEI announcements in Taiwan tend to negatively impact stock returns, especially when the signal strength is high. This suggests that cultural differences significantly influence how DEI commitments are perceived by investors. Further analysis using Upper Echelon Theory indicates that younger and more educated top management teams can positively moderate the market's reaction to DEI announcements. These findings highlight the importance of tailoring DEI strategies to fit local cultural norms and offer insights for investors, managers, and policymakers on enhancing DEI implementation. Overall, this thesis provides a comparative analysis of DEI performance between the U.S. and Taiwan, examining how different DEI announcement strategies affect market performance, return on assets, sales growth, and other financial metrics. It concludes with recommendations for stakeholders and policymakers on optimizing DEI commitments and outlines avenues for future research to further explore the global impact of DEI announcements.