The value of Saints and the price of Sin

SzeKee Koh, Robert B. Durand and Manapon Limkriangkrai

Pacific-Basin Finance Journal, 2015, vol. 35, issue PA, 56-72

Abstract: Using firms in the MSCI KLD 400 as exemplars of virtuous firms (the “Saints”), and firms in the “Triumvirate of Sin” – alcohol, tobacco and gaming – we utilize a modification of the Feltham and Ohlson (1995) valuation model and quantile regressions to estimate “Saint premiums” and “Sinner discounts”. For firms followed by sell-side analysts, the Saint premium is, on average, $5.77 (a 19.2% premium over the share price) and the Sinner discount is, on average, $3.91 (a discount of 32.1% of the share price). The evidence supports the notion that CSR creates shareholder value. Practices contrary to social norms destroy value.

Keywords: Corporate Social Responsibility; Environmental, Social and Governance; Value relevance; Feltham–Ohlson model (search for similar items in EconPapers)
JEL-codes: G11 M14 M41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:35:y:2015:i:pa:p:56-72

DOI: 10.1016/j.pacfin.2014.10.003

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