Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures

Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures This study examines the relation between corporate social performance and stock returns in the UK. We closely evaluate the interactions between social and financial performance with a set of disaggregated social performance indicators for environment, employment, and community activities instead of using an aggregate measure. While scores on a composite social performance indicator are negatively related to stock returns, we find the poor financial reward offered by such firms is attributable to their good social performance on the environment and, to a lesser extent, the community aspects. Considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance can be rationalized by multi‐factor models for explaining the cross‐sectional variation in returns, but not by industry effects. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Financial Management Wiley

Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures

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Publisher
Wiley
Copyright
Copyright © 2006 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0046-3892
eISSN
1755-053X
DOI
10.1111/j.1755-053X.2006.tb00149.x
Publisher site
See Article on Publisher Site

Abstract

This study examines the relation between corporate social performance and stock returns in the UK. We closely evaluate the interactions between social and financial performance with a set of disaggregated social performance indicators for environment, employment, and community activities instead of using an aggregate measure. While scores on a composite social performance indicator are negatively related to stock returns, we find the poor financial reward offered by such firms is attributable to their good social performance on the environment and, to a lesser extent, the community aspects. Considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance can be rationalized by multi‐factor models for explaining the cross‐sectional variation in returns, but not by industry effects.

Journal

Financial ManagementWiley

Published: Sep 1, 2006

References

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