Academy of Management fournal

2003. Vol. 46, No. 4, 497-505.

SHARE PRICE REACTIONS TO WORK-FAMILY INITIATIVES:

AN INSTITUTIONAL PERSPECTIVE
MICHELLE M. ARTHUR
University of New Mexico
This study of 130 announcements in the Wall Street Journal illustrated a significant,
positive relationship between work-family human resource initiatives and share price.
Institutional theory provided the theoretical underpinning for such a relationship.
Share price reactions occurring both before and after "legitimation" of a program were
examined. As hypothesized, the work-family initiative and shareholder return relationship was higher in high-tech industries and, to a lesser extent, in industries with
higher proportions of female employees. Implications of the results are discussed and
suggestions for future research presented.

According to institutional theory, organizations

are embedded in institutional environments
that influence the practices and policies adopted
(DiMaggio & Powell, 1983). Several institutional
researchers have investigated the characteristics of
firms adopting work-family initiatives (Goodstein,
1994; Ingram & Simons, 1995; Morgan & Milliken,
1992). Firm characteristics, such as the proportion
of women employed, size, geographic location, sector, and industry affiliation, have been shown to
influence the pace at which work-family initiatives
are adopted (e.g., Morgan & Milliken, 1992). Researchers have suggested that once a work-family
policy becomes institutionalized, a firm's adoption
of that policy is an act of conformity to social expectations and a source of organizational "legitimacy" (Goodstein, 1994). Legitimate organizations
may be better able to garner resources such as
grants, loans, and investments (Meyer & Rowan,
1977). Because legitimacy increases firms' ability to
secure resources, adoption of work-family initiatives may increase firm value. Firm characteristics
have been shown to be predictors of such adoptions. They may also moderate the relationship between the adoption of work-family initiatives and
firm value.
Research examining the relationship between
work-family policies and firm-level outcomes is
largely lacking. One exception is Perry-Smith and
Blum's (2000) research examining the relationship
between work-family human resource "bundles"
and perceived firm performance. No study, how-

ever, has examined the relationship between workfamily initiatives and capital markets. The purpose
of the study described here was twofold. First, by
conducting an event study, I tested the immediate
stock market response to firm announcements of
work-family policies. I used institutional theory as
the theoretical underpinning for predicting a relationship between firm announcements of workfamily human resource decisions and share price.
Second, I investigated industry characteristics as
moderators of the relationship between workfamily policies and shareholder returns. Following
Perry-Smith and Blum (2000), I examined proportion of female employees as a moderator of the
work-family initiative and share price relationship.
I extended the analyses to consider unemployment
rate and high-tech classification as potential moderators. I investigated these industry characteristics
to examine whether variables that affect labor supply generate an institutional environment wherein
the adoption of work-family initiatives is essential
to legitimacy.

THEORETICAL BACKGROUND AND

HYPOTHESES
Work-Family Initiatives

The earliest large-scale work-family programs

were government-sponsored on-site child care centers instituted in response to an influx of female
labor during World War II (Glass & Estes, 1997).
Following the war, men returned to their jobs,
women moved out of the workforce, and these
child care centers were closed (Glass & Estes, 1997).
However, in the past 30 years, women have again
become a large proportion of the labor force. Concurrently, the structures of the family and of work
have changed. Dual-career earners and single

I am grateful to Alison Cook, Cindy Emrich, Jerry

Ferris, Steve Green, Kevin Hallock, Huseyin Leblebici,
Joe Martocchio, Laurie Morgan, Heather Smithson, Sara
Rynes, and three anonymous reviewers for their thoughtfully constructive comments.
497

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Academy of Management Journal

women with children now comprise a larger share

of the workforce than they had in the past. In response, one of the first widely recognized corporation-sponsored on-site child care centers was established in 1971 (Friedman, 1990).
In general, work-family initiatives fall into three
main categories: dependent care, family stress programs, and flexible work arrangements. Historically, firms' decisions about specific types of workfamily initiatives have varied. Throughout the
1970s and 1980s, firms adopted lower-cost alternatives to on-site child care, programs such as emergency and sick-child care, shared child-care centers, and child care referral services (Friedman,
1990). In the late 1980s, elder care services and
family-counseling services emerged as concerns
(Friedman, 1990). In the 1990s, firms addressed
flexible work arrangements, to meet perhaps the
most serious conflict created by work-family tensions. Programs such as Hextime, job sharing, compressed work weeks, shorter work weeks, and most
recently, telecommuting were adopted. In this research, the term work-family initiatives refers to
any of the programs or policies mentioned above.
In sum, work-family initiatives include any human
resource program or policy previously identified in
relevant scholarly literature as having the potential
to alleviate employees' work and family conflicts.
Institutional studies have investigated adoption
rates of individual work-family initiatives such as
elder care, child care, and paid maternity leave
(e.g., Goodstein, 1994). Institutional studies have
also examined wide ranges of initiatives (Ingram &
Simons, 1995; Morgan & Milliken, 1992). Morgan
and Milliken, for example, investigated the adoption rates of three categories: family leave, flexible
work options, and dependent care. Using a similar
classification scheme, I examined a wide range of
work-family policies classified into three main categories: dependent care, family stress programs,
and flexible work arrangements. In this work, however, I draw on institutional theory to propose and
examine a relationship between the adoption of
work-family policies and share price reactions in
the market.
Institutional Theory
Institutional theory can go beyond the adoption
and dispersion of work-family initiatives to address
the potential relationship between these initiatives
and shareholder returns. Institutional theorists
have posited that organizations are responsible to
customers, employees, and communities (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). Further,
firms face mimetic, normative, and coercive pres-

August

sures to incorporate prevailing concepts of work

into their structures (DiMaggio & Powell, 1983).
Following the institutionalization of a work-family
initiative, a firm's adopting it aligns social expectations about organizations with legitimacy requirements (Goodstein, 1994). Because legitimacy
increases a firm's ability to secure resources (Meyer
& Rowan, 1977), constituents are expected to react
to increased legitimacy in ways that increase the
value of the firm. In this research, constituents are
employees, consumers, investors, and the public at
large as potential purchasers of firm securities
(Fombrun, 1996). Institutional theory suggests that,
on the average, work-family initiatives should be
positively related to share price reactions. In keeping with institutional theory, I expect the announcement of a work-family human resource initiative to increase the expected value of a firm.
Therefore,
Hypothesis 1. Firm announcements of workfamily initiatives will, on tbe average, positively affect shareholder returns.
However, timing plays an important role in institutional theory. An overall positive reaction can be
divided into two components: the prelegitimation
and postlegitimation reactions. Prior to the institutionalization of a given work-family initiative, a
firm's adopting it may not signal legitimacy to constituents; thus, share price may not be affected.
However, postinstitutionalization announcements
of work-family initiatives should signal legitimacy
to constituents and may increase share price. Accurate identification of pre- and postlegitimation
periods requires noting a particular point in time
when adoption reaches a critical mass (Meyer &
Rowan, 1977). In view of temporal variation in
legitimation, I expected share price reaction to
work-family initiative adoption to vary with time
period. Therefore,
Hypothesis 2a. Before legitimation of workfamily initiatives, firm announcements of such
initiatives will not significantly affect shareholder returns.
Hypothesis 2b. After legitimation of workfamily initiatives, firm announcements of such
initiatives will positively affect shareholder
returns.
Characteristics of an organizational field or industry may also moderate the relationship between
work-family initiatives and shareholder returns.
Certain organizational fields may have characteristics that lead work-family initiatives to have a
heightened relationship to share price. I suggest

2003

that a high-tech industry classification, a high proportion of women in an industry, and a low industry unemployment rate are essential field characteristics that positively influence share price
reaction to work-family human resource initiatives.
Institutional researchers have proposed that
firms adopt work-family policies in response to the
actions of other successful firms within their organizational field or industry (Goodstein, 1994;
Ingram & Simons, 1995; Morgan & Milliken, 1992).
Osterman (1995) found that firms that rely on technical workers were more likely to adopt workfamily initiatives, noting that the demand for
highly skilled workers is often coupled with highcommitment work systems of which work-family
initiatives are a component. Similarly, Glass and
Estes (1997) suggested that organizations with
greater reliance on highly skilled labor should more
quickly implement family responsive programs
than those depending on less skilled labor. Hightech industries, with their large research and development components, rely on highly skilled labor.
On the average, research and development workers
are highly educated. These employees can and do
demand more benefits, among them work-family
benefits. In sum, high-tech firms exist in an environment wherein institutional conformity calls for
adopting work-family initiatives. In turn, legitimacy may provide increased resources (Meyer &
Rowan, 1977). Thus, the relationship between
work-family human resource decisions and shareholder return should be magnified in high-tech industries relative to those industries wherein workfamily policies are less institutionalized. Hence,
Hypothesis 3. The positive relationship between
the announcement of work-family initiatives and
shareholder returns will be stronger in high-tech
industries than in other industries.
Similarly, other organizational field characteristics may moderate the relationship between
work-family initiatives and shareholder returns.
Although work-family initiatives do not apply exclusively to women, nor do they apply to all
women, work-family initiatives tend to be interpreted as "female-friendly" (Magid, 1983), because
women often take on more dependent care responsibilities than men. Several institutional researchers have emphasized the proportion of female employees in a firm as an antecedent to its adoption of
work-family initiatives [Goodstein, 1994; Ingram &
Simons, 1992; Morgan & Milliken, 1992). "Firms
that employ a high proportion of women are dependent on a constituency that makes the strongest
demands for work-family programs and should
therefore be more responsive" [Goodstein, 1995:

Arthur

499

357). Firm response to female constituents creates

an organizational field wherein the adoption of
work-family initiatives is necessary to gain firm
legitimacy and resources. The relationship between
the adoption of work-family initiatives, firm legitimacy, and resources should be stronger in industries with a high proportion of female employees
than in those with a low proportion of female employees. Consequently,
Hypothesis 4. The positive relationship between announcements of work-family initiatives and shareholder returns will be stronger
in industries that employ a relatively high proportion of women than in those that employ a
relatively low proportion of women.
Firms may also be less responsive to work-family
demands when employees are faced with high unemployment rates within the firms' industry and
more responsive when unemployment rates are
low (Ingram & Simons, 1995; Kamerman & Kahn,
1987). When unemployment in an industry is low,
firms face mimetic and normative institutional
pressures for work-family initiatives, and their
adoption may be required for legitimacy. Because
legitimacy and resources are linked, I expect the
relationship between work-family policies and firm
resources to be moderated by the unemployment
rate. Thus,
Hypothesis 5. The positive relationship between announcements of work-family initiatives and shareholder returns will be stronger
in industries with low unemployment rates
than in those with high unemployment rates.
Several variables other than those stated in the
hypotheses were included as moderators in the
analyses. Specifically, I included the size of a firm
at the time of the announcement of a work-family
initiative to account for the idea that size might
influence shareholder returns. For example, large
firms' share price might be more sensitive to news
about work-family initiatives than smaller firms'
share price. Firm age was also included in the
model. The sample consisted exclusively of forprofit firms. Thus, a control for nonprofit versus
for-profit was not included.
METHODS
Data

The data were collected for firms listed on the

Fortune 500 list. In an effort to eliminate a survival
bias, I included firms that appeared on this list in
any year of the study for the entire study period

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Academy of Management Journal

(Farber & Hallock, 1999). The years examined in

the study were 1971 to 1996. I chose the starting
point to encompass one of the first widely publicized employer-sponsored on-site child care programs, the one established in 1971 at Stride Rite
Corporation (Friedman, 1990). Data collection
ended in 1996 because of a change in the style of
reporting articles in the Wall Street Journal Index.
The firms' accounting data and stock market performance measures were collected from the Center
for Research in Security Prices (CRSP) at the University of Chicago. Human resource policy data
were collected from the Wall Street Journal via the
annual Wall Street Journal Index. COMPUSTAT
provided the data for firm size. Ward's Business
Directory provided the data on firm age.
All announcements pertaining to a w^ork-family
human resource initiative were recorded and
coded. There were 231 work-family initiatives announced in the Wall Street Journal over the studied
time period. For reliability, two researchers identified work-family announcements. Their interrater
agreement was 88.8 percent. Forced rater agreement was used to code the remaining disagreedupon announcements. Work-family human resource initiatives were classified into four general
categories: dependent care [n = 95), flexible work
arrangements (n = 43), family stress [n = 31), and
general work-family [n = 47). The first three of
these categories are straightforward; for example, a
1984 announcement stating that "IBM began a
childcare referral service for its employees" was
coded as a dependent care decision. General workfamily, the less straightforward category, captures
announcements such as "Procter & Camble are
broadening the scope of their family-friendly policies." Few announcements [n = 15) were classified
as falling into more than one category.

August

firm's common stock price will increase. As argued

above, the announcement of a w^ork-family initiative may increase the future value of a firm. Thus,
shareholder return will increase accordingly.
Although event studies use many different techniques, they involve four general steps (see Brown
& Warner, 1985): (1) identify the event, (2) model
the normal (expected) total shareholder returns, (3)
estimate the abnormal (unexpected) total shareholder returns, and (4) analyze summary measures
for abnormal returns.
In the first phase of this event study, I identified
the dates of interest and constructed models of the
normal or expected returns. The relation between a
firm's shareholder return over a given time period
(1 year, or 255 trading days) and the shareholder
return for the same time period arising from an
equally weighted, diversified portfolio of common
stocks was estimated.

= a; +

nt + Vit

The diversified portfolio of stocks was equally

weighted with respect to the American Stock Exchange, the New York Stock Exchange, and the
Nasdaq Stock Market. Estimating the relationship
between each firm and a diversified portfolio of
stocks essentially controls for any external shocks
or trends in the stock market. I used Equation 1
(below) to estimate the relationship between a
given firm's return (RjJ and the market portfolio
(Rjjjt), where i represents the firm and ( represents
time in trading days:
Equation 2 was then used to compute the abnormal or excess returns [ER] arising after the announcement of a work-family initiative. I calculated excess returns as the difference between the
actual firm return and the firm's expected value.
The formula was

Event Study
Event study, a method typically used in research
on finance, was used for this analysis. In this study,
the event was defined as a firm's announcement in
the Wall Street Journal of a work-family initiative.
The underlying premise of event study is that once
new information about a firm is revealed to capital
markets, they will adjust to account for the expected value of the information (Fama, 1970). If
investors perceive that the information will increase the future profitability of the firm, shareholder return will increase immediately to reflect
that expectation (Fama, 1970). To the extent that
the information increases the future cash flows or
reduces the risk of the firm's stock, the discount
rate will decrease (Fama, 1970). When it does, the

(1)

(2)

where ^ represents the estimated relationship

between the market return and the firm return from
Equation 1. Excess returns were calculated for
various "windows," or periods of days surrounding
an event date (a work-family initiative announcement). In addition to excess returns for each
firm, several other statistics were calculated. The
average excess return for day t (the sum of excess
returns divided by the number of events) was calculated as

AERt= S ERJN,

(3)

2003

Arthur

Further, cumulative average excess returns

[CAERs; the sums ofthe average excess returns over
the days in an event window) were computed. The
cumulative average excess return for a relevant
event group /, where tj and f^ represent the first and
last day of an event window, was computed as
CAERi=

(4)

Researcher's examination of long event study

windows, some extending more than 60 days, has
given rise to debate as to the appropriate length of
these windows (e.g., McWilliams & Siegel, 1997).
The main concern is that the greater the length,
the greater the likelihood of confounding events
(McWilliams & Siegel, 1997) that may cloud the
relationship between the event of interest and
shareholder return. To specifically address this
concern, I present a set of results wherein a workfamily announcement was excluded if a firm released another announcement the day before, the
day of, or the day after the focal announcement.
This data set [n = 130) provides the cleanest examination of the work-family policy and shareholder
return relationship. McWilliams and Siegel emphasized short event windows. I used windows ranging from 1 through 3 days; the 3-day window accounted for possible leaks of information and
possible lags in constituents' reactions.
Following the suggestion of McWilliams and
Siegel (1997), I present two significance tests of
observed coefficients. The first is a standard parametric significance test. The test statistic is for
the null hypothesis that the excess return or cumulative average excess return is equal to zero. A
Bonferroni correction is applied to adjust for potentially spurious significance from conducting
hypothesis tests with various dependent variable
specifications. The mean correlation of the dependent variables was included in the construction of the Bonferroni term to account for the
correlation (0.7) among the dependent variables.
The second reported significance test is the generalized sign test. The null hypothesis for the
generalized sign test is that the fraction of positive (or negative) returns is the same as in the
estimation period. For example, if 42 percent of
the market model returns are positive in an estimation period, and 60 percent of firms have positive market model returns on the event day, the
test statistic reports whether the difference between the two percentages is significant. The
nonparametric or generalized sign tests are more
robust to outliers than parametric tests (Cowan,
1992). McWilliams and Siegel (1997) maintained

'501

that both test statistics should be significant to

indicate a relationship.
Regression Analyses
A second phase of the event study examined the
relationship between the cumulative excess returns
(CER) and firm characteristics. In these analyses,
the cumulative excess returns were regressed on
firm characteristic variables. Using ordinary least
squares (OLS) regression, I examined estimates of
the relationships between the magnitude of the cumulative excess return and the independent variables. As above, the p-value was adjusted with a
Bonferroni correction term.
Dependent variable. The dependent variable
was either the excess return for the three possible
one-day windows or cumulative excess returns for
the various two- and three-day windows. The latter
were calculated as:
(5)

Independent variables. Classification as a hightechnology industry; one-year lagged values of the

proportion of women and the unemployment rate
in an industry; firm size; firm age; a coding for preversus postlegitimation; and a weight variable were
calculated.
A high-technology industry was defined as one
"in which the number of research and development
workers was at least 50 percent higher than the
average proportion of all industries surveyed [by
the Bureau of Labor Statistics]" (Luker & Lyons,
1997: 13). A dummy variable was assigned a value
of 1 if a firm was classified as within a high-tech
industry and a 0 otherwise.
The U.S. Bureau of Labor Statistics provides a
Standard Industry Classification (SIC) scheme to
ascertain the proportion of women employed by an
industry. Using the three-digit SIC code, I identified the proportion of female employees, expressed
as a percentage, within an industry one year prior
to a work-family announcement. A one-year-lagged
value of the variable was included in the analyses.
Using the three-digit SIC code and industry-level
unemployment rates provided by the U.S'. Bureau
of Labor Statistics, I identified the industry unemployment rate one year prior to a work-family announcement. In the analyses, the lagged unemployment rate was expressed as a percentage.
Eirm size was the logarithm of the total number
of employees, measured in thousands, for each firm
at the time of a work-family announcement. For
firm age, I subtracted the founding date of a firm

Academy of Management Journal

502

from the current year (2001). This continuous variable was included in the model.
A dummy variable was constructed to account
for pre- and postlegitimation effects. Large organizations have been the pioneers of work-family programs (Hayghe, 1988). Using the earliest estimate of
work-family initiatives in large organizations, I
found that approximately 80 percent of large firms
(those with 250 employees or more) had at least one
work-family human resource program in 1987
(Hayghe, 1988). Given that the first widely publicized employer-sponsored work-family initiative
was adopted in 1971, a simple linear extrapolation
suggests that half of the firms in the Fortune 500
had instituted at least one work-family program by
1981. In 1981, the prevalence of work-family policies was estimated at approximately 50 percent.
Therefore, in this research I used 1981 to define the
periods before and after legitimation. This variable,
postlegitimation, was assigned a value of 0 if an
event occurred prior to 1981 and a value of 1 if it
occurred in 1981 through 1996.
Weight, included as a control variable, was the
inverse of the variance of a firm's daily stock returns over the 255 trading days estimation period. I
used this variable to prevent firms with high variance in stock returns from weighing more heavily
in the analyses than firms with low variance in
daily stock returns.
RESULTS

Table 1 presents the means, standard deviations,

and zero-order correlations for the variables. There
were 231 firm announcements of work-family human resource initiatives. However, after excluding
those firms with confounding information released
within a three-day (the day before, the day of, and

August

the day after) event window, the sample was reduced to 130 announcements. The results presented below are solely for announcements without
confounding events.
Hypothesis 1 states that the announcement of a
work-family human resource initiative will, on the
average, increase shareholder returns. The results
indicate that shareholder returns increased .36 percent on the day of a work-family announcement, a
significant increase as assessed with both of the
tests I applied (p < .01). The results also indicate
that shareholder returns increased .39 percent over
the three-day window surrounding firm announcements of work-family initiatives. As Table 2 suggests, on the average, share price increases in response to firm adoption of work-family initiatives.
Hypotheses 2a and 2b concern the effects of
legitimation. The results (Table 2), show that, prior
to legitimation in 1981, share price decreased 93
percent on the day prior to an announcement. The
remaining results are not significant. After 1981,
however, results suggest a positive share price reaction to work-family announcements both on the
day of an event (.38%, p < .01) and within the
three-day window (.48%, p < .05). Thus, the results indicate that share price reaction to announcements of work-family initiatives is positive
in the years studied here that followed the legitimation of these initiatives among U.S. firms.
Hypotheses 3-5 introduce industry characteristics as potential moderators of the effects of announcements of work-family initiatives on shareholder returns. Hypothesis 3 states that the
relationship between these announcements and
shareholder returns will be stronger in high-tech
industries than in other industries. As Table 3 indicates, the analyses support this hypothesis for all
the time windows studied. Announcements of the

TABLE 1
Descriptive Statistics and Correlations"
Variable

Mean

1. Average excess return, =

2. Cumulative average excess return, = j o
3. Cumulative average excess return, =_j +i
4. Industry proportion of women,_i
5. Industry unemployment rate,_i
6. High-technology firm
7. Firm size''
8. Firm age
9. Postlegitimation

0.0036
0.0030
0.0041
0.39
6.57
0.45
10.59
82.54
0.90

^ n = 130.
^ In thousands of employees. Logarithm.
* p < .05
**p < .01

s.d.
0.02
0.02 .71**
0.03 .61** .79**
0.13 .08
.17*
.03
2.13 .08
.02
0.50 .06
.02
1.05 -.05
49.83 -.16
-.06
0.30 .04
.16

.12

-.06
.06
.02

-.05
.10

-.47**
-.36**
.07

-.22**
.16

.38**
-.13
.01
.16

.03
.09

-.06

.26**
.05

-.17*

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Arthur

503

TABLE 2
Stock Price Reaction to Announcements of Work-Family Initiatives"
Reaction
Average excess return, =_i
Average excess return, = g
Average excess return, =+i
Cumulative average excess return, ^ . ^ g
Cumulative average excess return, = , +i
Cumulative average excess return, =_-i +i

Pre-1981

1971-96
-0.07*=*
0.36** "
0.11
0.28^^"=
0.46* "^
0.39^

-0.93*
0.16
0.42
-0.76
0.57
-0.35

Post-1981
0.03
0.38* '='='
0.07
0.40* *="=
0.44* ""
0.48* ^ ^

" The data are for announcements without confounding events on any day (t = 1, 0, or +1). For 1971-96, n = 130; for the pre-1981
(prelegitimation) period, n = 13; for the post-1981 period, n = 117. All coefficients are expressed as percentages. A Bonferroni correction
term is applied to significance levels,
^p < .10

* p < .05
**p < .01
Significance for the generalized sign hypothesis tests is denoted as follows:
^"^ p < .05

TABLE 3
Results of Regression Analysis: Excess Returns on Industry Characteristics"
Dependent Variable

Independent Variable

Cumulative Excess
Return, __j 0

Cumulative Excess
Return, = . +i

Cumulative Excess
Return, =_-, +j

Industry proportion of women,_i

Industry unemployment rate,_i
High-techology firm
Firm size'*
Firm age
Postlegitimation

0.18*
0.10
0.16^
0.02
-0.01
0.14^

-0.08
-0.10
0.15*
-0.02
-0.10
0.05

0.05
-0.04
0.19*
0.01
-0.01
0.15^

" n = 231. A weight variable, constructed as the inverse of the variance, was included as a control variable. The results are not reported.
A Bonferroni correction term is applied to significance levels.
^ In thousands of employees. Logarithm.
t p < .10
*p<.05

work-family initiatives of high-tech firms generate

greater increases in share price than those of firms
in other industries.
Hypothesis 4 asserts that the proportion of
women working in a firm will moderate the workfamily and shareholder return relationship. Significant results, giyen in Table 3, for one of the three
event windows examined provide some support for
this hypothesis. Specifically, the results show
higher share price reactions for the window comprising the day before and the day of an announcement. Hypothesis 5 states that the unemployment
rate in a firm's industry will moderate the relationship of interest here, with share price reaction to
work-family announcements greater during periods
of low unemployment than during periods of high
unemployment. As illustrated in Table 3, the results do not support this hypothesis.

DISCUSSION AND CONCLUSION

Empirical support is provided for a positive relationship between announcements of work-family

initiatives and shareholder returns. The average
share price reaction to the announcement of a
work-family initiative over a three-day window is
.39 percent. The average share price reaction occurring after legitimation of work-family initiatives
was slightly higher at .48 percent. These estimates
are comparable to those shown in other studies of
human resource decisions and share price reactions. A study of layoff announcements for a similar time period showed a .38 percent decrease in
share price (Farber & Hallock, 1999). Similarly, an
investigation of announcements of affirmative action awards and discrimination lawsuits showed
that share price increased .33 percent and de-

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creased .16 percent, respectively (Wright, Ferris,

Hiller, & KroU, 1995). Firms named the "best company for working mothers" reaped an increase in
share price of .69 percent (Hannon & Milkovich,
1996]. The average dollar value of the change in
share price associated with a work-family initiative
is approximately 60 million dollars per firm.
Although it is meaningful that shareholder return
in the largest firms exhibits reaction to work-family
human resource decisions, restricting the study to
Eortune 500 firms limits the generalizability of the
current findings. In addition, studying work-family
initiatives as a single category may be an oversimplification. Future research focusing on specific
work-family initiatives may provide a better understanding of their evolution. It may be the case that
a pre- and postlegitimation date can be identified
for each specific type of work-family initiative. Furthermore, the date at which firm adoption of each
type of initiative garners legitimacy may vary by
industry.
High-tech industries and, to a lesser extent, industries employing large proportions of women
were found to have somewhat higher returns to
work-family policy implementation. However, support was not found for industry unemployment rate
as a moderator variable. Perhaps the mechanism
through which industry characteristics moderate
the work-family and shareholder return relationship should be explored more fully. For example,
researchers do not know what type of investor is
responding to work-family announcements. The
importance of institutional investors has increased
dramatically in the past 50 years (according to a
2000 report from the Federal Reserve Board [www.
federal.reserve.gov]). Studies have suggested that
institutional shareholdings account for over 50 percent of Eortune 500 firms' ownership (Dutta, Dean,
& Collins, 1996). It may be the case that institutional investors are responding to work-family announcements while individual investors are not.
Studies addressing the type of investors responding
to work-family initiatives would be helpful.
The type of investor responding to work-family
announcements may also provide insight into the
speed of share price reaction. These results indicate
investors do not react prior to the day the news of a
work-family initiative is released to the press. However, once the press announces firm adoption of a
work-family initiative, investors immediately bid
up firm share price. This swift investor reaction
suggests that investors anticipate that a firm will
have access to more resources following the adoption of the work-family initiative. However, investors do not know if the announced work-family
program will become an actual firm practice. It may

August

be the case that the firm is announcing a workfamily initiative as a public relations strategy.
The relationship between work-family press releases and actual creation of a family-friendly firm
warrants exploration. A preliminary investigation
of whether firms are simply "talking the talk" or are
indeed "walking the walk" revealed that 61 percent
of the firms in the sample for the current study have
been named to Working Mother's "best companies
for working mothers" list in the past five years.
This suggests that the majority of firms are indeed
developing a more family-friendly work environment. Analyses of the relationship between workfamily practices and firm profitability would significantly add to the work-family literature.
Despite the limitations discussed above, the results show a link between work-family human resource decisions and common stock price. This
study adds to the work-family literature by showing that firm adoption of work-family policies affects the bottom line. At least since 1981, immediately foUow^ing the announcement of a work-family
initiative, the value of a firm increases. Further,
industry characteristics influence the magnitude of
these share price reactions. Several previous studies have supported the idea that work-family programs positively affect employees' psychological
well-being; this research shows that stakeholders
benefit economically as well.

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Michelle M. Arthur (arthur@mgt.unm.edu) is an assistant professor in the Anderson Schools of Management at

the University of New Mexico. She received her Ph.D. in
labor and industrial relations from the University of Illinois at Urbana-Champaign. Her current research focuses
on diversity-supporting human resource practices and
firm-level outcomes.