infonet-economy

In socially responsible investment (SRI) literature, several conclusions have been drawn on whether SRIs are able to generate market-adequate returns or not. On the one hand, creating SRIs might be costly due to less investment opportunities and on the other hand, firms targeted by SRIs may exhibit sustainable profitability. In this paper we analyze whether one or both of these explanations is/are appropriate for an approved list of a sustainable-impact bank. We use novel and unique firm-level screening data to measure sustainability based on the Global Alliance for Banking on Values principles. Following this initiative, sustainable impact should be considered as the overall investment object, whereas financial investment objectives act as constraints to guarantee sustainability. In this paper, we find that standardized sustainability ratings from external rating agencies are not useful in measuring sustainable impact on firm-level basis. High ratings fail to guarantee a business approach without a contradiction to certain sustainability aspects. Considering the diversification abilities of shrunk sustainability impact asset universes, we show that different levels of sustainable screening strictness cause in-sample diversification constraints. However, portfolios with the highest sustainability impact do not exhibit significantly negative abnormal returns compared to a five factor market model as well as to the MSCI All Country World Index out of sample. Finally, we document a strong improve in portfolio sustainability measures when increasing screening requirements.

This paper presents new evidence on the implications of corporate social responsibility (CSR) on stock returns. By implementing a long-term focus as well as using subdivided measures for CSR, we cater to the intangible nature and the heterogeneity of CSR activities. We use a novel classification of these activities into nine areas, each belonging to one of the standard environment, social, and governance (ESG) dimensions. Using cross-sectional return regressions and buy-and-hold abnormal returns, we find that firms with strong CSR significantly outperform firms with weak CSR in the mid and long run in certain areas. Firm returns increase up to 3.8% with respect to a one-standard-deviation increase of the CSR rating. In a two-stage least squares (2SLS) approach we verify that the main economic channel for the appreciation of strong CSR stocks is unexpected additional cash flows. The results are relevant for assessing the efficiency of CSR, and have broader implications for asset managers who can expect abnormal returns by investing in firms that exhibit a high CSR in the respective scores and holding the stocks for a longer period.

While addictions to substances such as alcohol, tobacco, and other drugs have been extensively investigated, interest has been growing in potential non-substance-related addictive behaviors (e.g., excessive gambling, buying or playing video games). In the current study, we sought to determine the prevalence and characteristics of a wide range of addictive behaviors in a general population sample and to identify reliable subgroups of individuals displaying addictive behaviors. Seven hundred seventy participants completed an online survey. The survey screened for the presence and characteristics of the main recognized substance and behavioral addictions (alcohol, tobacco, cannabis, other drugs, gambling, compulsive shopping, intensive exercise, Internet and mobile phone overuse, intensive work involvement, and overeating) in a three-month period. Key aspects of addiction were measured for each reported behavior, including negative outcomes, emotional triggers (positive and negative emotional contexts), search for stimulation or pleasure, loss of control, and cognitive salience. Latent class analysis allowed us to identify three theoretically and clinically relevant subgroups of individuals. The first class groups problematic users, i.e., addiction-prone individuals. The second class groups at-risk users who frequently engage in potentially addictive behaviors to regulate emotional states (especially overinvolvement in common behaviors such as eating, working, or buying). The third class groups individuals who are not prone to addictive behaviors. The existence of different groups in the population sheds new light on the distinction between problematic and non-problematic addiction-like behaviors. © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license

We study the relationship of corporate social responsibility (CSR) and the distribution of stock returns for an international sample. Firms with a high level of CSR generally exhibit superior stock price synchronicity in the markets of Europe, Japan, and the United States. In particular, we identify optimal levels of CSR to minimize idiosyncratic risk for each region. Moreover, CSR has a mitigating effect on crash risk in Europe and the United States. In contrast, firms from the Asia-Pacific region display CSR over-investment followed by a higher crash risk. This appears to be a consequence of globalization, which forces firms from Asia-Pacific to overinvest in CSR to adapt western standards.

This paper studies the reliability of environmental, social, and governance (ESG) assessments in the case of corporate scandals. Reliable disclosures on ESG assessments may reduce information asymmetries when it comes to due diligence, for instance. We use the press release of corporate scandals, which are seen as being unexpected events, and analyze ESG assessments before, during, and after the event year. We find a significant decline in retrospective controversy indicators during the period in which the scandals are released. Subsequent to the scandals, we document a rebound of these indicators. The assessments of forward-looking indicators indicate slightly significant increases during the scandal period. Moreover, our findings show that aggregated ESG assessments consisting of both retrospective and forward-looking indicators are useless when it comes to predicting corporate scandals. Therefore, the managerial implication of this paper recommends educating managers and investors upon how to obtain a comprehensive vision of the corporate social responsibility of a firm based on single ESG assessment indicators.

We examine in this paper the effects of corporate social responsibility (CSR) disclosure and CSR performance on firm value for S&P 500 firms from 2011 to 2014. We find that CSR disclosure is positively associated with firm value and that the effect of CSR disclosure on firm value is larger than the effect of CSR performance. On average, the overall firm value increase for one index point of Bloomberg's environmental, social, and governance (ESG) Disclosure Score is $260 million, whereas the increase for one index point of the Asset4 ESG Performance Score is below $90 million. Moreover, we find that CSR performance scores related to the environment and governance are positively associated with firm value while the social score is negatively associated. Our results suggest that CSR disclosure mediates CSR performance. Based on prior research, we argue that CSR disclosure tends to be positively biased and too complex to be processed properly. We conclude that a relatively high amount of CSR disclosure is misinterpreted as good CSR performance.

Relying on Google Trends search data for the S&P 500 stocks between 2004 and 2015, we find that investing in momentum in a portfolio of stocks with increasing search activity minus a portfolio of stocks facing a decreasing search activity does not exhibit, ceteris paribus, significant positive momentum returns. Furthermore, we show that retail investors’ attention creates volatility. For that reason, investing in stocks with stable retail investors’ attention decreases significantly momentum volatility. The momentum effect has a negative relationship with the market tone and does not significantly impact the long-term reversal effect. For those reasons, while general investors overreact to information as shown by Hillert et al. (2014), we conclude that retail investors underreact to information.