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Socially Responsible Investing as a Competitive Strategy for Trading Companies in Times of Upheaval Amid COVID-19: Evidence from Spain

Author

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  • Jesús Manuel Palma-Ruiz

    (Facultad de Economía Internacional, Universidad Autónoma de Chihuahua, Chihuahua 31125, Mexico)

  • Julen Castillo-Apraiz

    (Departamento de Economía Financiera II, University of the Basque Country UPV/EHU, 48015 Bilbao, Spain)

  • Raúl Gómez-Martínez

    (Departamento de Economía de la Empresa, Universidad Rey Juan Carlos, 28032 Madrid, Spain)

Abstract

Sustainable and responsible investing (SRI) is a strategy that seeks to combine both financial return and social good. The need to create and preserve SRI represents a key argument in investment decision-making, which leads other firms and investors to make strategic decisions beyond financial logic, based on environmental, social, and governance (ESG) factors. Within this framework, this paper aims to further clarify the understanding of potentially profitable strategies for firms during a global crisis such as a pandemic. Both primary and secondary data were gathered, and descriptive analyses were conducted. In Spain, several IBEX-35 companies announced donations amid the COVID-19 crisis. First, companies were classified into two groups based on donations made. For this, we searched for ESG online news. Then, profitability records amongst companies were identified and compared. In the trading session after the announcements, we found 12 of the 35 companies that made donations had a higher performance index of more than 2 and 3 points over the companies that did not make donations. With a weekly perspective, the difference was 91 and 60 basis points, respectively. These results suggest that in times of upheaval, investors base their strategy on ESG factors, contributing to the emerging literature on individual motives of SRI. Second, by conducting a survey and collecting data from 575 Spanish citizens, we conclude that after this crisis, people’s perceptions towards corporate social responsibility (CSR) will change, affecting consumption preferences in those companies that exhibited socially irresponsible or unsupportive behaviour. Hence, the reputation of firms, their social image, and social trust will play an important role in the near future.

Suggested Citation

  • Jesús Manuel Palma-Ruiz & Julen Castillo-Apraiz & Raúl Gómez-Martínez, 2020. "Socially Responsible Investing as a Competitive Strategy for Trading Companies in Times of Upheaval Amid COVID-19: Evidence from Spain," IJFS, MDPI, vol. 8(3), pages 1-13, July.
    • Handle: RePEc:gam:jijfss:v:8:y:2020:i:3:p:41-:d:381134
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    4. Andreea Chițimiea & Mihaela Minciu & Andreea-Mariana Manta & Carmen Nadia Ciocoiu & Cristina Veith, 2021. "The Drivers of Green Investment: A Bibliometric and Systematic Review," Sustainability, MDPI, vol. 13(6), pages 1-25, March.
    5. Brzeszczyński, Janusz & Gajdka, Jerzy & Pietraszewski, Piotr & Schabek, Tomasz, 2022. "Has the risk of socially responsible investments (SRI) companies stocks changed in the COVID-19 period? International evidence," Finance Research Letters, Elsevier, vol. 49(C).
    6. José Manuel Saiz-Alvarez & Jesús Manuel Palma-Ruiz & Herik Germán Valles-Baca & Luis Alberto Fierro-Ramírez, 2021. "Knowledge Management in the Esports Industry: Sustainability, Continuity, and Achievement of Competitive Results," Sustainability, MDPI, vol. 13(19), pages 1-20, September.
    7. Jean-Guillaume Dumas & Sonia Jimenez-Garcès & Florentina Șoiman, 2021. "Blockchain technology and crypto-assets market analysis: vulnerabilities and risk assessment," Working Papers hal-03112920, HAL.
    8. Imen Khanchel & Naima Lassoued & Rym Gargoury, 2023. "CSR and firm value: is CSR valuable during the COVID 19 crisis in the French market?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(2), pages 575-601, June.
    9. Rabi Narayan Kar & Amanpreet Kaur, 2023. "Do Disclosures Drive Socially Responsible Investing?," Paradigm, , vol. 27(1), pages 7-26, June.
    10. Ștefan Cristian Gherghina & Daniel Ștefan Armeanu & Camelia Cătălina Joldeș, 2020. "Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis," IJERPH, MDPI, vol. 17(18), pages 1-35, September.
    11. Michele Fioretti & Victor Saint-Jean & Simon C Smith, 2022. "The Voice: The Shareholders' Motives Behind Corporate Donations during COVID-19 (former title: Selfish Shareholders: Corporate Donations during COVID-19)," SciencePo Working papers hal-03386585, HAL.
    12. Ksenija Denčić-Mihajlov & Mladen Krstić & Dejan Spasić, 2020. "Sensitivity Analysis as a Tool in Environmental Policy for Sustainability: The Case of Waste Recycling Projects in the Republic of Serbia," Sustainability, MDPI, vol. 12(19), pages 1-19, September.
    13. Remo-Diez, Nieves & Mendaña-Cuervo, Cristina & Arenas-Parra, Mar, 2023. "Exploring the asymmetric impact of sustainability reporting on financial performance in the utilities sector: A longitudinal comparative analysis," Utilities Policy, Elsevier, vol. 84(C).
    14. Riccardo Savio & Edoardo D’Andrassi & Francesca Ventimiglia, 2023. "A Systematic Literature Review on ESG during the COVID-19 Pandemic," Sustainability, MDPI, vol. 15(3), pages 1-17, January.
    15. Jean-Guillaume Dumas & Sonia Jimenez-Garces & Florentina Șoiman, 2021. "Risk analyses of the crypto-market: A literature review," Post-Print hal-03112920, HAL.
    16. Sharma, Gagan Deep & Tiwari, Aviral Kumar & Talan, Gaurav & Jain, Mansi, 2021. "Revisiting the sustainable versus conventional investment dilemma in COVID-19 times," Energy Policy, Elsevier, vol. 156(C).
    17. Vanita Tripathi & Amanpreet Kaur, 2022. "Does Socially Responsible Investing Pay in Developing Countries? A Comparative Study Across Select Developed and Developing Markets," FIIB Business Review, , vol. 11(2), pages 189-205, June.
    18. Dongyong Zhang & Shuhui Lu & Stephen Morse & Lingyi Liu, 2022. "The impact of COVID-19 on business perspectives of sustainable development and corporate social responsibility in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(6), pages 8521-8544, June.

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