David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Ezio Di Nucci
Jack Alan Reynolds
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Journal of Business Ethics 116 (1):1-20 (2013)
This paper argues the case that tests of how investors value corporate social performance (CSP) based upon realised stock market returns are liable to be weak tests if markets are efficient and firms change CSP policies infrequently. We provide a theoretical explanation of why this will be the case using examples to illustrate. Subsequently, we set out an alternative theoretical framework for the purposes of investigating whether markets place a positive, or a negative, valuation on CSP, and show why this is superior to tests based upon Tobin’s Q. Using US KLD data, we demonstrate that, as theorised, markets place a positive value on CSP that is not detected by conventional returns-based tests. Our conclusion is that researchers who are interested in the question of whether engagement with a corporate social responsibility agenda is a value-enhancing activity for a company (as argued by some stakeholder theorists) or value destructive (as argued by Friedman, The social responsibility of business is to increase its profits, The New York Times Magazine, 1970), need to look beyond returns-based tests to answer the research question posed.
|Keywords||Corporate social performance Valuation methods|
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References found in this work BETA
Michael L. Barnett (2005). Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility. Proceedings of the International Association for Business and Society 16:287-292.
Yongtae Kim & Meir Statman (2012). Do Corporations Invest Enough in Environmental Responsibility? Journal of Business Ethics 105 (1):115-129.
Pieter van Beurden & Tobias Gössling (2008). The Worth of Values – a Literature Review on the Relation Between Corporate Social and Financial Performance. Journal of Business Ethics 82 (2):407-424.
Catherine Liston-Heyes & Gwen Ceton (2009). An Investigation of Real Versus Perceived Csp in s&P-500 Firms. Journal of Business Ethics 89 (2):283 - 296.
Citations of this work BETA
Christophe Revelli & Jean‐Laurent Viviani (2015). Financial Performance of Socially Responsible Investing : What Have We Learned? A Meta‐Analysis. Business Ethics: A European Review 24 (2):158-185.
Alan Gregory, Rajesh Tharyan & Julie Whittaker (2013). Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth. Journal of Business Ethics 124 (4):1-25.
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