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Socially Responsible Firms: Financial and Market Performance
... These abilities may systematically differ between SRI and conventional funds since it may be that the latter, typically larger, type of fund tends to be better managed. Allen and Kask (1997) overcome this limitation by identifying the CSR characteristics of individual companies and by using that information in conjunction with the performance of individual stocks. They employ firm-level social performance data courtesy of Kinder, Lydenberg, Domini and Company (KLD) to identify firms that exhibit strong social performance. ...
... However, our results are consistent with those of Chung et al. (2003) where the Fortune survey was again used but with a different approach to measuring outperformance. This paper's findings are also consistent with those of Allen and Kask (1997), where the KLD social responsibility components that comprise part of the Business Ethics scores are employed. ...
... Extending the ideas of Hamilton, Jo and Statman (1993), Allen and Kask (1997) examine the market and financial performance of socially responsible firms. They use the Domini Social Index to identify firms that have strengths but no weaknesses in the eight areas of focus in the index. ...
... They compare both raw and risk-adjusted returns of these family-oriented companies to the S&P 500 and a matched sample of firms. Consistent with both Hamilton, Jo and Statman (1993) and Allen and Kask (1997), Preece and Filbeck find that investors do not earn statistically significant excess raw returns relative to the S&P 500 and the matched sample of firms. After adjusting for risk, the family-friendly portfolio outperforms the market but underperforms the matched sample portfolio. ...
In this paper we examine the market reaction to the announcement by Fortune of the ‘Best 100 Companies to Work for in America.’ Employees rate firms based on several criteria including trust in management, pride in work/company and camaraderie. To examine long-term performance, we calculate raw and risk-adjusted returns and then compare them to the returns of a matched sample of firms. In addition, we calculate the return on a buy and hold investment in the sample firm less the return on a buy-and-hold investment in a matched sample firm (BHARs). We find a statistically significant positive response to the announcement of the ‘100 best companies to work for’ by Fortune. Also, based on all measures of risk-adjusted return, we find these firms generally outperform the matched sample of companies. The BHAR results, although not exhibiting the level of statistical significance, are consistent with the raw and risk-adjusted return results.
... Finally, Allen and Kask (1997) examined the financial and market performance of socially-responsible firms. They defined social responsibility as a concern for the environment, community, women and minorities, and nuclear power. ...
... Our results are consistent with both the results presented in Allen and Kask (1997) and in Hamilton, Jo, and Statman (1993). We find that investors do not necessarily "do well by doing good." ...
Abstract In this paper we,examine,the returns to a portfolio of 29 firms,that are perceived,as family-oriented. The sample,is based on firms,awarded,the best 100 companies,for working mothers,in Working,Mother,Magazine’s annual,survey. There is much,anecdotal,evidence supporting the benefits of these programs, but little evidence relating family-oriented policies to shareholder wealth. We find, based on raw returns, that family-friendly firms do not earn statistically significant excess returns relative to a matched,sample or to th eS&P,500. Based on risk-adjusted returns, the family-friendly portfolio outperforms the market, but underperforms a matched,sample portfolio. © 1999 Elsevier Science Inc. All rights reserved. JEL classification:G10; G11 Keywords: Family friendly firms; Portfolio returns; Risk-adjusted returns
... It may be that the latter, typically larger type of fund tends to be better managed. Allen and Kask (1997) overcome this limitation by identifying the CSR characteristics of individual companies and using that information in conjunction with the performance of individual stocks. They employ firm-level social performance data courtesy of KLD to identify firms that exhibit strong social performance. ...
We consider the stock performance of America's 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey's publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm's presence in the Top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the Top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with stocks exhibiting a growth style, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms declines. We also find companies that are newly listed as good citizens and companies in the Top 100 but outside the S&P 500 can provide considerable positive abnormal returns to investors, even after allowing for their market capitalization, price-to-book ratios, and sectoral classification.
... In particular, the impact of social performance on market share price has produced confl icting results. Despite fi nding social performance to be associated with a positive effect on fi rm profi tability, Allen and Kask (1997) fi nd a negative effect on stock market valuations. Statman (2006) fi nds the relative performance of socially responsible versus conventional stocks to vary across time. ...
The present research study provides new evidence regarding the nature of investor reactions to signals of a reputation for diversity. Employing event study methodology, we track returns for firms listed on DiversityInc.'s Top 50 Companies for Diversity over a five-year period. We find support for our hypothesis that the market will respond positively to the announcement of a firm's inclusion on the list. Counter to our second hypothesis, we find that market reaction is more positive for manufacturing firms than for service firms. This study provides practical evidence that a firm's investment in diversity and quality diversity management techniques will be recognized and rewarded by the market. In addition, we have added to the current literature by examining one specific component of social performance (diversity management) and its relationship with market valuation in an effort to better understand the construct as a whole.
Since 2000, "Business Ethics" magazine has published a list of the 100 Best Corporate Citizens. Our event study finds significant positive abnormal returns for new companies added to the annual listing on the press release date of the survey, both initially and in subsequent survey releases. Over longer holding periods, the top 100 companies consistently outperform the S&P 500, yet are not significantly different from a matched set of companies, with the exception of the initial survey year (2000). However, a rebalancing strategy based on new additions outperforms both the S&P 500 and a matched portfolio. Copyright (c) 2009, The Eastern Finance Association.
In this paper, we examine the returns to a portfolio of 12 publicly held firms that were featured in the July/August 1997 edition of Mother Jones as the “20 Better Places to Work” (the remaining eight are privately held). This survey was based on the firm's track record for charitable giving, fair labor practices, progressive benefits, sound environmental practices, and satisfied employees. While there is much evidence that the above qualities are very desirable for employees, little evidence exists indicating whether such a record results in increased shareholder wealth. In this study, we compare the annual returns, on a raw and risk-adjusted basis, for the selected firms to a broad market index, as well as a more appropriate benchmark (based on market capitalization and industry classification). We also determine whether there is an announcement effect associated with the public release of the list of Mother Jones firms.
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