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

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 weak 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, (2) states that have more established anti-discrimination laws for the LGBT community, and (3) companies that have LGBT-friendly policies in place. Our findings complement prior research that focuses on the economic consequences of firm-level LGBT human rights policies. Such firm level policies represent a new dimension to management control systems that can have a market impact.