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The Stock Performance of America’s 100 Best Corporate Citizens

  • Stephen Brammer

    (University of Bath)

  • Chris Brooks

    ()

    (ICMA Centre, University of Reading)

  • Stephen Pavelin

    ()

    (Economics - Business School - University of Reading)

This study considers the stock performance of America’s 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey’s publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm’s presence in the Top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the Top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with stocks exhibiting a growth style, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms declines. We also find companies that are newly listed as good citizens can provide considerable positive abnormal returns to investors, even after allowing for their market capitalisation, price-to-book ratios, and sectoral classification.

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Paper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2006-06.

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Length: 38 Pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:rdg:icmadp:icma-dp2006-06
Contact details of provider: Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
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Web page: http://www.henley.reading.ac.uk/

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  8. Peter Antunovich & David Laster & Scott Mitnick, 2000. "Are high-quality firms also high-quality investments?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 6(Jan).
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