Abstract
This study evaluates the quantitative and qualitative impact of an inaugural hiring of a Chief Diversity Officer (CDO) on firm value by conducting an event study, financial ratio analysis, and personal interviews. My research analyzes the impact on firm value following the announcement of the initial hiring of a CDO (which is utilized as a proxy for a firm’s emphasis on diversity). This study examines a 28-year period (from 1990 through 2017) and incorporates press release data obtained from the LexisNexis Academic database (now termed Nexis Uni) regarding the announcement of the hiring of a CDO; financial and company data from the Bloomberg database; industry data from Mergent online; and diversity news data from LexisNexis Academic. It utilizes Eventus software for the event study analysis. The event study methodology incorporates stock market price reactions before and after the announcement using the Center for Research in Security Prices (CRSP) through the Wharton Research Data Services (WRDS) database. The results suggest that while the announcement of a CDO hiring does not significantly impact firm value, there are favorable financial statement ratios relative to the industry for companies that possess a CDO (ratio analysis). Finally, interview data provide robust insights into the connection between diversity and financial performance metrics (interviews). This study provides empirical evidence to support the value of a corporation’s embracing diversity through the hiring of a CDO.|Keywords: Chief Diversity Officer, diversity, diversity metrics, financial statement ratios, event study methodology