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Published in: Journal of Business Ethics 1/2022

16-04-2021 | Original Paper

Evidence on the Economic Consequences of Marriage Equality and LGBT Human Rights

Authors: Jessie Y. Zhu, Wally Smieliauskas

Published in: Journal of Business Ethics | Issue 1/2022

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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.
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Footnotes
1
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.
 
2
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).
 
3
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.
 
4
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.
 
5
We thank an anonymous reviewer for this observation.
 
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Metadata
Title
Evidence on the Economic Consequences of Marriage Equality and LGBT Human Rights
Authors
Jessie Y. Zhu
Wally Smieliauskas
Publication date
16-04-2021
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 1/2022
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-021-04802-7