Fact Findings on the Synergy Effect between Diversity Management and Japanese Corporate Profitability

Abstract

The increasing labor shortages in Japan and the country's need to enhance its international competitiveness, necessitate an increase in the participation of diverse human resources, including women, in the labor force. Therefore, this study examines three research issues: the interaction between diversity management and corporate performance, the qualitative and quantitative effects of the promotion of diversity, and the negative effects of promoting diversity on corporate performance. The study aims to confirm the bidirectional effects between diversity and corporate performance, and identify the possibilities resulting from these interactions. Using Toyo Keizai's CSR database from FY 2010 to FY 2017, we conduct ordinary least squares estimations and confirm that regardless of job rank, diversity encourages good corporate performance, particularly in companies that face a labor shortage or operate in industries where diversity is low. Furthermore, the effects of a high return on assets (ROA) are stronger in companies with a lower duration of overtime, and those with a high take-up rate of paid leave. Our findings have implications for policy change, and provide suggestions to improve the quality of management.