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

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  • Everett, Craig R.

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.

Suggested Citation

  • Everett, Craig R., 2013. "Measuring the social responsibility discount for the cost of equity capital: evidence from benefit corporations," MPRA Paper 55441, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:55441
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    References listed on IDEAS

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    Cited by:

    1. Paola Busto & Giuseppe Viola, 2022. "Societ? Benefit: le prime esperienze lombarde nel settore delle public utility," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2022(1), pages 167-174.
    2. Giulia Alberti di Catenaja & Donato Berardi & Michele Tettamanzi & Samir Traini, 2022. "Le societ? benefit e il servizio idrico integrato," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2022(1), pages 141-166.
    3. Shafron, Emily, 2019. "Investor tastes: Implications for asset pricing in the public debt market," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 6-27.

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    More about this item

    Keywords

    Cost of Capital; Private Capital Markets; Benefit Corporations; Social Enterprise; Corporate Social Responsibility; Socially Responsible Investing;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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