Boardroom Racial (In)Equality and Stock Returns...
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ECGI New Working Paper Alert
ECGI Finance Series 789/2021
Tuesday 12 October 2021
Boardroom Racial (In)Equality and Stock Returns:
Evidence from the Black Lives Matter Protests

Maksims Dzabarovs, Stockholm School of Economics in Riga
Romans Madesovs, Stockholm School of Economics in Riga
Anete Pajuste, Stockholm School of Economics in Riga and ECGI 


Boardroom Diversity • Corporate Governance • Mass Protests •
Environmental Social And Governance (ESG)

We study a cross-section of stock price reactions to the Black Lives Matter (BLM) protests that followed the killing of George Floyd on May 25, 2020. We find that companies with higher representation of black directors on the corporate board are associated with higher stock returns during the mass BLM protests. This exogenous shock (BLM protests) provides an opportunity to evaluate the relationship between boardroom racial diversity and firm value. Using a sample of S&P 500 index companies, we find that before the killing of George Floyd black directors held on average 8.2% of the board seats, with each black director holding on average 1.34 board seats, which is significantly higher than for directors of other ethnic origins.

Within one year after the mass BLM protests, the proportion of board seats held by black directors increased to 9.6%, and 31% of the newly appointed directors were black. We find that companies typically add new diverse directors by increasing the board size. Additionally, we show evidence that boards are paying more attention to racial diversity issues in the aftermath of the BLM protests, and only a low correlation exists between talking about racial diversity in proxy statements and actual racial diversity in the boardroom.
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Professor Anete Pajuste ECGI Profile
Professor of Finance
Stockholm School of Economics in Riga

The ECGI is an international scientific non-profit association providing a forum for debate and dialogue between academics, legislators and practitioners, focusing on major corporate governance issues. 
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