Corporate Equality and Equity Prices: Doing Well While Doing Good?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper tests how a specific type of social responsibility-corporate equality-affects firm value. Corporate equality is measured by the corporate equality index (CEI). This index quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Using a sample of CEI-rated, publicly traded firms in the U.S., we find that, between 2002 and 2006, firms with a higher degree of corporate equality have higher stock returns and higher market valuation (Q). We provide suggestive, causal evidence that corporate equality enhances firm value through better performance in product markets and labor markets: Firms with a higher degree of corporate equality also tend to have larger sales, higher profit margins, higher employee productivity, and attract more employees. These results are robust to the inclusion of unobserved firm-heterogeneities. Overall, our results support the value-enhancing effects of corporate social responsibility. Terms of use: Documents inJEL Classification: G11; G12; J70; M14

The performance of morally questionable shares in South Africa (2004–2019)

“…This will lower the responsible company's cost of capital, increase its share price and lead to lower future returns (Hamilton, Jo & Statman 1993). Fu and Shan (2009) posit that RI strategies should underperform fully diversified portfolios because of the constraint the screening process places on the investment opportunity set. This explanation is related to modern portfolio theory where the lack of adequate diversification in RI funds could contribute to lower returns (Barnett & Salomon 2006).…”

“…The potential underperformance of RI funds could be owing to the willingness of socially and environmentally conscious investors to accept lower returns. Fu and Shan (2009) argue that RI-focussed investors would tolerate lower investment returns because they derive non-financial utility from holding certain socially and environmentally responsible shares. On the other hand, stakeholder theory suggests that companies involved in more sustainable activities would be at a longterm competitive advantage and, therefore, may generate higher share returns (see, e.g.…”

“…Bauer et al 2005;Gil-Bazo, Ruiz-Verdú & Santos 2010;Girard, Rahman & Stone 2007;Hamilton et al 1993;Nofsinger & Varma 2014;Shank, Manullang & Hill 2005;Statman 2000). The evidence appears inconclusive, with a number of studies reporting that RI underperforms conventional strategies (Frost et al 2005;Girard et al 2007), a few studies presenting evidence of RI outperformance (Fu & Shan 2009;Gil-Bazo et al 2010;Knoepfel 2001) and many findings showing that RI returns were no different from conventional strategies (Bauer et al 2005;Hamilton et al 1993;Nofsinger & Varma 2014). Other studies compared the performance of sin-themed investment strategies against RI strategies (notably Fabozzi et al 2008;Hong & Kacperczyk 2009;Richey 2016;Salaber 2009, Vide 2016).…”

The responsible investment practices of the world's largest government sponsored investment funds

“…Empirical evidence of this pattern has been found for strong corporate performance on governance 10, environmental11, social12 or all three factors (Landier and Nair 2008). A Deutsche Bank Study (2012) which reviewed the 10 See (Gompers, Ishii and Metrick 2003, Ammann, Oesch and Schmid 2011, Bauer, Eichholtz and Kok 2010, Core, Guay and Rusticus 2006, Jo and Maretno 2011, Bebchuk, Cohen and Wang 2010 11 See (Al-Tuwayijri, Christensen and Hughes 2004, Guenster 2011, Semenova andHassel 2008) 12 See (Edmans 2011, Richard, Murthi and Kiran 2007, Fu and Shan 2009 literature argued that "ESG best in class focused funds should be able to capture superior riskadjusted returns if well executed" but it also pointed to studies which see neutral (Cortez, Silva andAreal 2009, Bauer, Koedijk andOtten 2005) or negative (Heinkel, Kraus andZechner 2001, Galema andScholtens 2008) association between financial performance and strong ESG indicators in corporations.…”

“…2 For empirical support on this position, see the following: Gompers, Ishii and Metrick 2003, Ammann, Oesch and Schmid 2011, Bauer, Eichholtz and Kok 2010, Core, Guay and Rusticus 2006, Jo and Maretno 2011, Bebchuk, Cohen and Wang 2010, Al-Tuwayijri, Christensen and Hughes 2004, Guenster 2011, Semenova and Hassel 2008, Edmans 2011, Richard, Murthi and Kiran 2007, Fu and Shan 2009, Landier and Nair 2008 For example, investors are embedded as stakeholders in the Extractive Industry Transparency Initiative In this paper, I will empirically test the importance of agency related vs structural factors in determining the likelihood that a GSIF will adopt a responsible investment policy. Following a literature review that will provide theoretical grounds, this argument will be put to empirical scrutiny using two research questions:…”