Which dimensions of social responsibility concern financial investors?
Social and environmental ratings provided by social rating agencies are multidimensional. Using the six sub-ratings provided by the Vigeo rating agency, we perform a principal component analysis and we highlight three main socially responsible (SR) dimensions related to (1) the direct non-financial stakeholders (employee, customers and suppliers), (2) the indirect stakeholders (environment and society) and (3) the financial stakeholders (stockholders and debt holders).We explore the link between stock returns and these three SR dimensions. Our main result is that, for each SR dimension, investors ask for an additional risk premium when they decide to hold non SR stocks. The cost of equity is thus lower for socially responsible firms. The average premium over the period 2003-2010 is larger for the components "direct non-financial stakeholders" and "financial stakeholders" than for the component "indirect stakeholders". For this last component, the premium obviously exists only since the end of 2008. Environment and community involvement have only recently become a more important risk factor in investors' minds. About the former risk premia ("direct non-financial stakeholders" and "financial stakeholders"), investors appear to penalize firms with the worst behavior in respect to their direct non-financial stakeholders and reward firms with good corporate governance practices
|Date of creation:||2012|
|Date of revision:|
|Publication status:||Published in Cahiers de Recherche du CERAG n° 2012-01 E2. 2012, 37 p|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00679629|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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- Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006.
"Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures,"
Financial Management Association, vol. 35(3), Autumn.
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