Forecasting price delay and future stock returns: The role of corporate social responsibility

Yujing Gong, Kung‐Cheng Ho, Chia‐Chun Lo, Andreas Karathanasopoulos and I‐Ming Jiang

Journal of Forecasting, 2019, vol. 38, issue 4, 354-373

Abstract: This paper investigates the role of corporate social responsibility (CSR) performance in forecasting companys' stock prices and future returns. The forecasting analysis identifies a negative association between CSR performance and proxies of price delay. The negative CSR–delay association is weak for state‐owned enterprises (SOEs) because of their politically oriented motivation of CSR activities, but significantly strong for non‐SOEs. Furthermore, we find that forecasting delayed firms is expected to have higher future returns. In particular, the returns premium is most attributable to the CSR component of delay, compared with the non‐CSR component. Taken together, these results suggest that CSR performance plays a positive role in enhancing stock price efficiency, and a potential explanation is that CSR performance can be considered as additional information for equity predictions.

Date: 2019
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https://doi.org/10.1002/for.2600

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:38:y:2019:i:4:p:354-373

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