Abstract
This paper investigates the relationship between racial diversity and financial performance. Annually, Fortune magazine publishes a list of the 50 Best Companies for Minorities. We compare the accounting profitability of firms appearing on the list to two benchmarks: 1) A set of firms matched by industry, size, and prior performance; and 2) Value-weighted industry averages. Results indicate that the companies recognized by Fortune as minority friendly, are strong financial performers. However, superior performance cannot be linked to diversity initiatives. Fortune firms outperform benchmarks as early as three years prior to recognition. While, there is some indication of relative improvement in the years leading up to and immediately following listing, no significant difference is found between the sample and benchmarks five years after listing.
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