Do Ethical Companies Have High Stock Prices or High Returns?

Bing Yu, Shengxiong Wu and Mary Jane Lenard
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Bing Yu: School of Business, Meredith College, 3800 Hillsborough St., Raleigh, NC 27607, USA
Shengxiong Wu: School of Business, Texas Wesleyan University, Fort Worth, TX 76105, USA
Mary Jane Lenard: School of Business, Meredith College, 3800 Hillsborough St., Raleigh, NC 27607, USA

JRFM, 2022, vol. 15, issue 2, 1-15

Abstract: In this paper, we examine the performance of an impact investing strategy using the most ethical companies to build an impact investing portfolio. We test the time-series and cross-sectional returns of the impact portfolio, explore the financial analyst coverage of the most ethical firms, and run regressions to analyze the valuation of the most ethical firms. Our empirical results reveal that the portfolio consisting of the most ethical firms has a higher risk-adjusted return and that the most ethical firms have lower stock valuations than comparable stocks. We attribute our findings to the incomplete information in business ethics norms.

Keywords: impact investing; investment performance; asset pricing; corporate social responsibility (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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