How Markets Learn to Value the Financial Performance of Socially Responsible Firms

Market reactions to a company’s performance on environmental and other social issues are ambiguous, because it is difficult to measure social and financial performance and how they affect each other. We, however, create a virtual value-weighted portfolio based on the list of “100 Best CSR companies in the world” published by Reputation Institute and show that investing in this portfolio could provide investors annual abnormal returns of between 1.98 percent and 2.74 percent.

Corporate social responsibility (CSR) facilitates the integration of business operations with values so that the interests of all stakeholders—including customers, suppliers, employees, communities, governments, society, and the … Read more