Labor & Employment Law Daily Wrap Up, REPORTS—Researcher considered whether firms that maintained DEI programs experienced different returns than firms that dismantled them, (Sep 3, 2026)

By WK Editorial Staff

The authors, one from Berkeley and one from Stanford, found that firms that stood by their DEI commitments performed, on average, just as well as those that complied with the administration’s anti-DEI directives.

Companies that maintained diversity, equity, and inclusion programs after the Trump administration ordered a rollback of such initiatives did not suffer financially compared with firms that complied, according to a new study from researchers at UC Berkeley and Stanford University.

The paper, titled “Markets Do Not Punish Firms for Maintaining DEI,” examines how publicly traded companies responded after President Trump issued Executive Order 14173 in January 2025 directing federal agencies to investigate and eliminate what the administration described as illegal DEI programs. The authors found no evidence that firms that resisted the administration’s pressure by maintaining or reaffirming DEI efforts experienced worse stock performance or lower revenue than firms that scaled back those initiatives.

The findings challenge a common argument advanced by critics of corporate DEI programs that maintaining such efforts exposes companies to significant financial risks, whether through consumer backlash, investor concerns, or government retaliation. Instead, the researchers concluded that large corporations were generally able to resist executive pressure “without suffering significant financial consequences.”

Executive orders and agency guidance. Executive Order 14173, signed January 21, 2025, directed federal agencies to terminate DEI-related activities and instructed agency leaders to identify potential civil compliance investigations involving publicly traded corporations, nonprofits, professional associations, and universities. The administration later reinforced that effort through guidance from the Department of Justice, which said it would investigate and penalize illegal DEI programs in the private sector and educational institutions receiving federal funding.

According to the researchers, the order created a natural test of whether markets would punish firms that continued DEI initiatives after receiving a clear signal that the federal government opposed them. Some corporations quickly rolled back DEI programs, while others publicly reaffirmed their commitments.

Eight major companies, four measures. The study identified eight major S&P 500 companies that publicly maintained or reaffirmed DEI efforts, including Apple, Cisco, Costco, Delta Air Lines, Dollar Tree, JPMorgan Chase, Microsoft, and Pfizer. Executives at several companies explicitly defended DEI policies following the executive order. The researchers also used broader measures of resistance, including evaluations from activist group DEI Watch, company disclosures in Securities and Exchange Commission filings, and shareholder votes rejecting anti-DEI resolutions.

Similar results. Across all four measures, the results were similar.

Using stock price data from S&P 500 firms, the researchers analyzed cumulative abnormal returns, a metric designed to isolate company-specific performance from broader market movements. They compared performance before and after the issuance of Executive Order 14173, examining whether firms that maintained DEI programs experienced different returns than firms that dismantled them.

The answer was largely no.

While some firms that maintained DEI occasionally outperformed their peers and others lagged behind, the overall differences were statistically insignificant. The study found no meaningful negative effect on stock performance in either short-term or long-term analyses. Even when the researchers employed multiple statistical models and robustness checks, the central finding remained unchanged.

“There was no significant difference in abnormal returns” between resisting and compliant firms, the paper found. The authors reported that all of the major treatment measures produced similarly null results.

The researchers also looked for evidence of immediate market punishment after the executive order was issued. Examining stock performance during the seven trading days before and after Jan. 21, 2025, they found no indication that investors sold shares of companies that maintained DEI programs. That finding, they said, weakens the argument that markets initially punished resistant firms before later recovering.

Corporate revenue considered. The study further examined corporate revenue, reasoning that sales performance could reveal consumer backlash even if investors remained unconcerned.

Using quarterly revenue data reported in SEC filings, the authors compared firms that maintained DEI efforts with those that did not. Once again, they found no statistically significant differences. Revenue trends were effectively identical between the two groups, regardless of which DEI-resistance measure was used.

Why? The paper suggests several possible explanations.

One is that public support for corporate DEI remained relatively strong despite the administration’s campaign. The researchers cite survey data showing that 69 percent of U.S. adults still believed it was important for businesses to support DEI. The paper also notes prior research finding that meaningful diversity initiatives can improve business outcomes and help firms retain employees. Another possibility is that consumers may react negatively when companies abandon DEI efforts, offsetting any criticism from opponents of such programs.

The researchers highlighted examples such as Costco, which publicly resisted anti-DEI shareholder proposals and continued to report strong business results. They also pointed to Apple, whose shareholders overwhelmingly rejected an anti-DEI proposal despite public criticism from President Trump. The study found no evidence that Trump’s subsequent social media attacks on Apple’s DEI policies damaged the company’s stock-market performance.

Political pressure impact. More broadly, the authors frame their analysis as a question about the ability of civil society institutions to resist pressure from political leaders.

Large corporations, they argue, are among the most influential nongovernmental actors in the United States and may play a role in constraining governmental power. If firms believe resistance will trigger severe financial consequences, they may be more likely to comply with political demands. The study’s findings suggest those concerns may be overstated, at least in the context of DEI policies and among large publicly traded firms.

“Firms are among the most consequential non-state actors in market democracies,” the authors wrote, adding that organized resistance to executive pressure has been relatively rare even though their results indicate the financial costs of resistance may be lower than many business leaders assume.

The study concludes that while debates over DEI remain highly politicized, the data does not support claims that corporations face measurable market penalties for maintaining such programs. Instead, the researchers found that firms that stood by their DEI commitments performed, on average, just as well as those that complied with the administration’s anti-DEI directives.

The study was authored by Hanna Folsz, a doctoral candidate at Stanford University, and Jacob M. Grumbach, an associate professor at the Goldman School of Public Policy at UC Berkeley.

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