2024 Fall Seminar Series Seminar: Xiwen Zhao & Dr. Dan Halgin University of Kentucky

Exogenous Shocks and Opportunities for Mobilization: The Case of Market Reactions to Firm LGBTQ Inclusion Following the Orlando Nightclub Shooting and the Election of Trump

Abstract: This study explores the influence of exogenous shocks on institutions. We propose and test that exogenous shocks may mobilize episodic resistance against a dominant institution by making dissidents perceive them as opportunities to delegitimize the institution or gain support from elite allies. We situate our exploration in the context of LGBTQ rights as an institution by examining how investors reacted to firm LGBTQ inclusion following two exogenous events in 2016: the Orlando nightclub shooting and the election of Donald Trump. Our event study shows that both events resulted in greater abnormal returns for less LGBTQ-inclusive firms headquartered in more conservative states, especially when they had a lower level of institutional ownership. The two events had the observed effects despite the dominance of LGBTQ rights as reflected in that less LGBTQ-inclusive firms normally have lower annual stock returns. A text analysis of relevant Twitter (now X) posts lends support to our interpretation of these findings by showing a sudden surge of both anti-LGBTQ and pro-LGBTQ voices on Twitter immediately after the two events.