Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Konstantina Kappou () and Ioannis Oikonomou
Additional contact information
Konstantina Kappou: University of Reading

Journal of Business Ethics, 2016, vol. 133, issue 3, No 9, 533-552

Abstract: Abstract This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns. Trading volumes for deleted stocks are significantly increased on the event date, while the operational performances of the respective firms deteriorate after their deletion from the social index.

Keywords: Corporate social responsibility; CSP; CSR; MSCI KLD 400 index; Socially responsible investment; SRI (search for similar items in EconPapers)
JEL-codes: G14 G32 M14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://link.springer.com/10.1007/s10551-014-2409-z Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Is there a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:133:y:2016:i:3:d:10.1007_s10551-014-2409-z

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-014-2409-z

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().