Measuring the social responsibility discount for the cost of equity capital: evidence from benefit corporations

Craig Everett

MPRA Paper from University Library of Munich, Germany

Abstract: In 2010, Maryland became the first state to allow firms to incorporate as “benefit corporations,” which are for-profit entities with a social purpose. Since then, nineteen other states have followed. Using survey data from the population of 94 benefit corporations existent at the time of the survey, this paper directly measures the “social responsibility discount” – the degree to which investors in a benefit corporation have a lower required return on equity than they would have for traditional firms. This paper finds that the discount is approximately 35%. This paper also provides unique descriptive statistics about benefit corporations and their founders.

Keywords: Cost of Capital; Private Capital Markets; Benefit Corporations; Social Enterprise; Corporate Social Responsibility; Socially Responsible Investing (search for similar items in EconPapers)
JEL-codes: G02 G30 L21 M13 M14 (search for similar items in EconPapers)
Date: 2013-08-01
New Economics Papers: this item is included in nep-hme
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Citations: View citations in EconPapers (3)

Published in Journal of Behavioral Finance & Economics 2.3(2013): pp. 55-75

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:55441

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