Is there a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices

Konstantina Kappou () and Ioannis Oikonomou
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Konstantina Kappou: ICMA Centre, Henley Business School, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: This study investigates the financial effects of additions to and deletions from two of the most well-known social stock indices: the Calvert social index and the MSCI KLD 400 index. By examining not only short-term abnormal returns but also trading activity, earnings per share and long-term performance of stocks that are involved in these events, we are able to shed new light on the characteristics of the 'social index effect'. We find that the addition of a stock to either index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns of approximately -1.5% in the short run that can reach -14% six months after the event. Trading volumes for deleted stocks are significantly increased on the event date and operational performance of the respective firms deteriorates after their deletion from the social index. These findings are consistent with the asymmetric financial effects of corporate social performance that are connected to social index re-compositions.

Keywords: Social Index; Index Effect; Corporate Social Responsibility; CSR; CSP; Market Efficiency; Information Content Hypothesis; Exchange Traded Funds; Mutual Funds. (search for similar items in EconPapers)
JEL-codes: G14 G32 M14 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (1)

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Journal Article: Is There a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices (2016)
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