Abstract
This paper analyzes the market reaction to the reported discrimination against or harassment of LGBT stakeholders (i.e., employees and customers) using a unique hand-collected sample consisting of 167 events worldwide. The results show a negative and significant average effect following the announcement of an LGBT misconduct incident, with an around 0.5% abnormal decrease in market value over the event day and the next trading day. The average magnitude of impact is significantly lower after the #MeToo movement, suggesting that investors tend to be less indulgent regarding inappropriate behavior based on sexual orientation. We also find that firms experiencing a large negative magnitude of impact perform concrete corrective actions to repair their tarnished reputation.
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