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Diversity Washing


Andrew Baker

Berkeley Law School

David F. Larcker

Stanford University - Graduate School of Business; European Corporate Governance Institute (ECGI); Stanford University - Hoover Institution

Charles McClure

University of Chicago Booth School of Business

Durgesh Saraph

Jump Trading

Edward M. Watts

Yale School of Management


We provide large-sample evidence on whether U.S. publicly traded corporations opportunistically use voluntary disclosures about their commitments to employee diversity. We document significant discrepancies between companies' disclosed commitments and their hiring practices and classify firms that discuss diversity more than their actual employee gender and racial diversity warrants as “diversity washers." We find diversity-washing firms obtain superior scores from environmental, social, and governance (ESG) rating organizations and attract investment from institutional investors with an ESG focus. These outcomes occur even though diversity-washing firms are more likely to incur discrimination violations and pay larger fines for these actions. Our study highlights the consequences of selective ESG disclosures on an important social dimension of employee diversity, equity, and inclusion.

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