Events

Mr. Dave (Young-Il) Baik
PhD Candidate in Accountancy
University of Illinois at Urbana-Champaign

I define diversity cheap talk as a phenomenon where management communicates their support for diversity but do not follow through with actions. Prior literature provides scant evidence on how diversity cheap talk influences the ethical climate of a firm. This study aims to fill this gap by investigating the effect of management’s diversity cheap talk on ethical climate using unique firm-store-employee matched data. Utilizing both store-level and employee-level longitudinal data, I find that diversity cheap talk has a negative impact on the firm’s ethical climate. I employ a cross-lagged variable test as well as exploit hate crime occurrences in the vicinity of employee residences to mitigate endogeneity concerns. Additional analyses indicate the negative impact of diversity cheap talk on ethical climate is more pronounced in stores with employees who possess a heightened interest in diversity and have undergone formal diversity training; and less pronounced in stores where hiring practices are aligned with diversity. Employee-level tests corroborate the main findings and suggest employee exposure to discrimination as a potential channel of cheap talk identification.