IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02156596.html
   My bibliography  Save this paper

CSR and Market Valuation: International Evidence

Author

Listed:
  • Sylvain Marsat

    (CRCGM - Centre de Recherche Clermontois en Gestion et Management - UdA - Université d'Auvergne - Clermont-Ferrand I - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand)

  • Benjamin Williams

    (CRCGM - Centre de Recherche Clermontois en Gestion et Management - UdA - Université d'Auvergne - Clermont-Ferrand I - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand)

Abstract

Do socially responsible firms benefit from ethical goodwill? On the one hand, taking externalities into account can be a competitive disadvantage. On the other hand, financial benefits may result from ethical behavior. Thanks to a worldwide dataset of ESG ratings (MSCI ESG ratings), we examine the relationship between a firm's CSR rating and its shareholder value. After controlling for industry, region, year and R&D, we observe, contrary to mainstream empirical studies, strong evidence of a negative impact of responsible behavior on corporate market value. More precisely, environmental performance was penalized by investors over the 2005-2009 period, whereas involvement in human capital seems to have been valued by the market.

Suggested Citation

  • Sylvain Marsat & Benjamin Williams, 2013. "CSR and Market Valuation: International Evidence," Post-Print hal-02156596, HAL.
    • Handle: RePEc:hal:journl:hal-02156596
    DOI: 10.2139/ssrn.1833581
    Note: View the original document on HAL open archive server: https://hal.science/hal-02156596
    as

    Download full text from publisher

    File URL: https://hal.science/hal-02156596/document
    Download Restriction: no
    File URL: https://libkey.io/10.2139/ssrn.1833581?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Renneboog, L.D.R. & Ter Horst, J.R. & Zhang, C., 2007. "The Price of Ethics : Evidence from Socially Responsible Mutual Funds," Discussion Paper 2007-29, Tilburg University, Center for Economic Research.
    2. Nihat Aktas & Bodt Eric De & Jean-Gabriel Cousin, 2011. "Do financial markets care about SRI? Evidence from mergers and acquisitions," Post-Print hal-02312637, HAL.
    3. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
    4. Geoffrey Heal, 2005. "Corporate Social Responsibility: An Economic and Financial Framework," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(3), pages 387-409, July.
    5. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    6. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    7. Denis Dupré & I. Girerd-Potin & S. Jimenez-Garces & P. Louvet, 2006. "Les investisseurs paient pour l'éthique : conviction ou prudence," Post-Print halshs-00118508, HAL.
    8. Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
    9. Sinkin, Charlene & Wright, Charlotte J. & Burnett, Royce D., 2008. "Eco-efficiency and firm value," Journal of Accounting and Public Policy, Elsevier, vol. 27(2), pages 167-176.
    10. Stefan Beiner & Wolfgang Drobetz & Markus M. Schmid & Heinz Zimmermann, 2006. "An Integrated Framework of Corporate Governance and Firm Valuation," European Financial Management, European Financial Management Association, vol. 12(2), pages 249-283, March.
    11. Wolfgang Drobetz & Andreas Schillhofer & Heinz Zimmermann, 2004. "Corporate Governance and Expected Stock Returns: Evidence from Germany," European Financial Management, European Financial Management Association, vol. 10(2), pages 267-293, June.
    12. Ron Bird & Anthony D. Hall & Francesco Momentè & Francesco Reggiani, 2007. "What Corporate Social Responsibility Activities are Valued by the Market?," Journal of Business Ethics, Springer, vol. 76(2), pages 189-206, December.
    13. Abagail McWilliams & Donald Siegel, 2000. "Corporate social responsibility and financial performance: correlation or misspecification?," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 603-609, May.
    14. Galema, Rients & Plantinga, Auke & Scholtens, Bert, 2008. "The stocks at stake: Return and risk in socially responsible investment," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2646-2654, December.
    15. Weber, Manuela, 2008. "The business case for corporate social responsibility: A company-level measurement approach for CSR," European Management Journal, Elsevier, vol. 26(4), pages 247-261, August.
    16. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    17. Igor Goncharov & Joerg Richard Werner & Jochen Zimmermann, 2006. "Does Compliance with the German Corporate Governance Code Have an Impact on Stock Valuation? An empirical analysis," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(5), pages 432-445, September.
    18. Paul C. Godfrey & Craig B. Merrill & Jared M. Hansen, 2009. "The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 425-445, April.
    19. Aktas, Nihat & de Bodt, Eric & Cousin, Jean-Gabriel, 2011. "Do financial markets care about SRI? Evidence from mergers and acquisitions," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1753-1761, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jian Liang & Ameeta Jain & Hao Wu, 2021. "Does Corporate Social Responsibility Vary by Real Estate Asset Types? Evidence from Real Estate Investment Trusts," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    2. Min-Lee Chan & Cho-Min Lin & Huan-Min You, 2022. "Corporate Social Responsibility and Value of Cash Holdings in Taiwan: The Role of Family Firms," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 12(4), pages 1-3.
    3. Sylvain Marsat & Benjamin Williams, 2016. "Does the Market Value the Social Dimension? International Evidence," Bankers, Markets & Investors, ESKA Publishing, issue 142, pages 28-40, May-June.
    4. Mohamed Arouri & Guillaume Pijourlet, 2017. "CSR Performance and the Value of Cash Holdings: International Evidence," Journal of Business Ethics, Springer, vol. 140(2), pages 263-284, January.
    5. Shahbaz, Muhammad & Karaman, Abdullah S. & Kilic, Merve & Uyar, Ali, 2020. "Board attributes, CSR engagement, and corporate performance: What is the nexus in the energy sector?," Energy Policy, Elsevier, vol. 143(C).
    6. Ramírez-Orellana, Alicia & Martínez-Victoria, MCarmen & García-Amate, Antonio & Rojo-Ramírez, Alfonso A., 2023. "Is the corporate financial strategy in the oil and gas sector affected by ESG dimensions?," Resources Policy, Elsevier, vol. 81(C).
    7. Gonenc, Halit & Scholtens, Bert, 2017. "Environmental and Financial Performance of Fossil Fuel Firms: A Closer Inspection of their Interaction," Ecological Economics, Elsevier, vol. 132(C), pages 307-328.
    8. I. Girerd-Potin & S. Jimenez-Garces & Pascal Louvet, 2014. "Which Dimensions of Social Responsibility Concern Financial Investors?," Post-Print halshs-01337706, HAL.
    9. Sylvain Marsat & Benjamin Williams, 2016. "Does the market value the social dimension? International evidence," Post-Print hal-02156613, HAL.
    10. Isabelle Girerd-Potin & Sonia Jimenez-Garcès & Pascal Louvet, 2014. "Which Dimensions of Social Responsibility Concern Financial Investors?," Journal of Business Ethics, Springer, vol. 121(4), pages 559-576, June.
    11. Sabbaghi, Omid, 2022. "The impact of news on the volatility of ESG firms," Global Finance Journal, Elsevier, vol. 51(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sylvain Marsat & Benjamin Williams, 2016. "Does the Market Value the Social Dimension? International Evidence," Bankers, Markets & Investors, ESKA Publishing, issue 142, pages 28-40, May-June.
    2. Sylvain Marsat & Benjamin Williams, 2016. "Does the market value the social dimension? International evidence," Post-Print hal-02156613, HAL.
    3. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    4. Oberndorfer, Ulrich & Schmidt, Peter & Wagner, Marcus & Ziegler, Andreas, 2013. "Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 497-509.
    5. Timo Busch & Nils Lehmann & Volker H. Hoffmann, 2012. "Corporate Social Responsibility, Negative Externalities, and Financial Risk: The Case of Climate Change," Tinbergen Institute Discussion Papers 12-102/IV/DSF40, Tinbergen Institute.
    6. Sackley H. W. & Vashakmadze T. T., 2014. "The enhancement of equity valuations in developed and emerging markets through the use of sustainable investment indicators," Journal of Corporate Finance Research Корпоративные финансы, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», issue 2 (30), pages 53-57.
    7. Elsayed, Khaled & Paton, David, 2005. "The impact of environmental performance on firm performance: static and dynamic panel data evidence," Structural Change and Economic Dynamics, Elsevier, vol. 16(3), pages 395-412, September.
    8. Andreas Ziegler, 2012. "Is it Beneficial to be Included in a Sustainability Stock Index? A Panel Data Study for European Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(3), pages 301-325, July.
    9. Amir Gholami & John Sands & Habib Ur Rahman, 2022. "Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different?," Sustainability, MDPI, vol. 14(5), pages 1-17, February.
    10. Wolfgang Schultze & Ramona Trommer, 2012. "The concept of environmental performance and its measurement in empirical studies," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 22(4), pages 375-412, January.
    11. Hayam Wahba, 2008. "Does the market value corporate environmental responsibility? An empirical examination," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 15(2), pages 89-99, March.
    12. Urs von Arx & Andreas Ziegler, 2008. "The Effect of CSR on Stock Performance: New Evidence for the USA and Europe," CER-ETH Economics working paper series 08/85, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    13. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    14. Ozgur Ozdemir & Fatemeh Binesh & Ezgi Erkmen, 2022. "The effect of target’s CSR performance on M&A deal premiums: a case for service firms," Review of Managerial Science, Springer, vol. 16(4), pages 1001-1034, May.
    15. Rajesh Kumar Bhaskaran & Irene Wei Kiong Ting & Sujit K. Sukumaran & Saraswathy Divakaran Sumod, 2020. "Environmental, social and governance initiatives and wealth creation for firms: An empirical examination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 710-729, July.
    16. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    17. Eng, Li Li & Fikru, Mahelet G. & Vichitsarawong, Thanyaluk, 2021. "The impact of toxic chemical releases and their management on financial performance," Advances in accounting, Elsevier, vol. 53(C).
    18. Stefan Ambec & Paul Lanoie, 2007. "When and Why Does It Pay To Be Green?," CIRANO Working Papers 2007s-20, CIRANO.
    19. Stefan Ambec & Paul Lanoie, 2009. "Performance environnementale et économique de l'entreprise," Economie & Prévision, La Documentation Française, vol. 0(4), pages 71-94.
    20. Eduardo Duque-Grisales & Javier Aguilera-Caracuel, 2021. "Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack," Journal of Business Ethics, Springer, vol. 168(2), pages 315-334, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02156596. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.