The Effect of CSR on Stock Performance: New Evidence for the USA and Europe

Urs Von Arx () and Andreas Ziegler
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Urs Von Arx: CER-ETH - Center of Economic Research at ETH Zurich

No 08/85, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper provides new empirical evidence for the effect of corporate social responsibility (CSR) on corporate financial performance. In contrast to former studies, we examine two different regions, namely the USA and Europe. Our econometric analysis shows that environmental and social activities of a firm compared with other firms within the industry are valued by financial markets in both regions. However, the respective positive effects on average monthly stock returns between 2003 and 2006 appear to be more robust in the USA and, in addition, to be nonlinear. Our analysis furthermore points to biased parameter estimations if incorrectly specified econometric models are applied: The seemingly significantly negative effect of environmental and social performance of the industry to which a firm belongs vanishes if the explanation of stock performance is based on the Fama-French threefactor or the Carhart four-factor models instead of the simple Capital Asset Pricing Model.

Keywords: Corporate social responsibility; Environmental performance; Financial performance; Asset pricing models. (search for similar items in EconPapers)
JEL-codes: G12 M14 Q01 Q56 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2008-05
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-env, nep-fmk and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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