Does It Really Pay to Do Better? Exploring the Financial Effects of Changes in CSR Ratings

M. Benlemlih, J. Jaballah and Jonathan Peillex ()
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Jonathan Peillex: CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne

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Abstract: Previous literature on the link between corporate social responsibility (CSR) and financial performance has focused mainly on the financial implications of a firm's level of CSR without considering the potential effects on financial performance of variations in CSR rating. We try to fill this gap by studying whether variations in a firm's CSR rating affect systematic risk, firm value, and portfolio performance. First, our results show that an increase in firms' CSR efforts, as reflected by an increase in their CSR ratings, significantly reduces systematic risk. Second, a positive variation in CSR ratings significantly improves firm value. Finally, from a portfolio perspective, a strategy that consists of buying stocks that have experienced a CSR ratings increase and selling stocks that have experienced a CSR ratings decrease (or remain stable) leads to lower financial performance. Taken together, our findings provide new evidence and financial implications for firms and portfolio managers. \textcopyright 2018, \textcopyright 2018 Informa UK Limited, trading as Taylor & Francis Group.

Date: 2018
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Citations: View citations in EconPapers (21)

Published in Applied Economics, 2018, 50 (51), pp.5464--5482. ⟨10.1080/00036846.2018.1486997⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03680601

DOI: 10.1080/00036846.2018.1486997

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