53 research outputs found
Corporate social responsibility and stock market performance
No full textWe analyse the performance of a large sample of Socially Responsible (SR) stocks relative to a Control Sample (CS) of equivalent size for 14 years. We find that individual SR stocks have on average significantly lower returns and unconditional variance than CS stocks when controlling for industry effects. This result is paralleled by descriptive evidence on the lower (daily return) mean and variance of the buy-and-hold strategies on the SR portfolio with respect to those on the control portfolio. Beyond this first evidence we discover that: (i) individual SR stocks are significantly less risky when controlling for conditional heteroskedasticity; (ii) there are no significant differences in risk-adjusted returns between the two buy-and-hold strategies on (SR and CS) portfolios; (iii) the buy-and-hold strategies on the SR portfolio exhibits significantly lower exposition to systematic nondiversifiable risk. These last findings are robust to different-market model, Generalized Autoregressive Conditional Heteroskedasticity (GARCH(1, 1)), Asymmetric Power ARCH (APARCH(1, 1))-model specifications.
Corporate social responsibility and earnings forecasting unbiasedness
No full textWe investigate the relationship between corporate social responsibility (CSR) and I/B/E/S analysts' earnings per share (EPS) forecasts using a large sample of US firms for 1992-2011. Based on literature findings, we decompose the CSR effect into four factors: accounting opacity, corporate governance, stakeholder risk, and overinvestment. We find that all of them significantly affect both the absolute forecast error on EPS and its standard deviation controlling for forecast horizon; number of analysts and forecasts; and year, industry, and broker house effects. Consistently with our ex ante hypotheses, overinvestment, stakeholder risk, and accounting opacity have a positive effect, increasing both dependent variables, while corporate governance quality has a negative effect. A crucial aspect of our findings is that high CSR quality in terms of the four factors (i.e., accounting transparency, high corporate governance quality, stakeholder risk mitigation, and absence of overinvestment) contributes to making earnings forecasts unbiased as unbiasedness is generally met in the subsample of the Top CSR quality companies and markedly violated in the subsample of the Bottom CSR companies. We also document that overinvestment and stakeholder risk are sufficient to produce this effect. © 2013 Elsevier B.V
The contributions of betas versus characteristics to the ESG premium
No full textFirms that score high on environmental, social, and governance (ESG) indicators exhibit lower expected returns. This negative ESG premium might be driven by the lower risk associated with high ESG scores (betas), or it could signal investors' preferences for firms with high ESG scores (characteristics). We show that ESG as a characteristic mainly drives the premium. Specifically, a one standard deviation increase in the ESG characteristic is associated with a decrease in expected returns of 2.73% annually. In addition, the ESG characteristic explains a higher proportion of the cross-sectional variation in expected returns compared to ESG betas. We further caution for the presence of an ESG bias within the ESG premium that is due to positive realized returns preceding lower long-term expected returns. When correcting our estimates for the ESG bias the decrease in expected returns turns out to be 3.41% on an annual basis. The ESG bias correction, together with a firm-level methodology, can help clarify the mixed findings documented in the literature
Market vs. analysts reaction: the effect of aggregate and firm-specific news
No full textFirm-specific and aggregate shocks generate reassessment of investors and analysts expectations on earnings forecasts and on the fundamental value of equities. In this article, we evaluate the effects of this combined reaction on the implied equity risk premium extracted from a standard two-stage dividend discount (DD) model. If investors and analysts revisions coincide, and in absence of measurement errors in the DD formula, the observed shocks should not have any significant impact on prices and Implied Equity Risk Premium (IEPR). On the contrary, in an analysis based on data for all S&P 500 COMPOSITE INDEX constituents from 1990 to 2003, we observe substantial overreaction of investors to both downward and upward firm-specific forecast revisions, plus overreaction to changes in GDP and to the announcements of the Consumer and Business Confidence indicator. We also observe that positive overreaction to upward earning forecast revisions and GDP changes falls after the stock bubble burst, while overreaction to upward forecast revision and to announcements of the Consumer Confidence Index looses significance after the 9/11 terrorist attack. These findings are broadly consistent with the hypothesis of reduced participation of uninformed (noise) traders to financial markets after these two shocks.
Till mortgage do us part: Mortgage switching costs and household's bank switching
No full textWe investigate the role of mortgage switching costs in shaping the households' decision to change their main bank. To this end, we use a unique panel dataset that enables us to infer household's bank switching, in conjunction with a legal reform that exogenously slashed down the mortgage switching costs. The empirical evidence, which survives to a variety of robustness checks, supports the hypothesis that the explicit switching costs in the retail banking market are a weighty factor in shaping households' bank switching, despite any potential "informational lock-in". Dissecting the results, we show that the effects of the reform were not uniform across households. The more educated households, those with a longer or broader relationship with their previous bank and those residing in ex-ante less competitive banking markets were at the forefront of the wave of bank switching. (C) 2020 Elsevier B.V. All rights reserved
The determinants of household's bank switching
No full texttWe investigate households’ bank switching exploiting a unique representative dataset from Bank of ItalySurvey on Household Income and Wealth that follows the households and their bank(s) over time. First,we document that bank switching is quite prevalent in our sample, with almost a quarter of householdschanging their main bank in a biannual horizon. Next, we relate the decision to switch to the featuresand dynamics of household bank relationship, and to the characteristics of both households and banks.In line with the switching cost theory, we find that using more than a single bank, as well as the intensity(number of services used), and the scope (bank services used) of the relationship with the main bank playa role in shaping the households’ decision to switch. Moreover, bank switching is strongly and positivelycorrelated with both taking out and having paid off a mortgage
Legal Origins and Corporate Social Responsibility
No full textThe legal origin literature documents that civil and common law traditions have different impacts on economic outcomes. We contribute to this literature by formulating and testing hypotheses on the effect of legal origins on corporate social responsibility, overall and in different specific dimensions. We find that, net of industry-specific effects, companies in common law countries score higher in corporate governance and community involvement, while those in countries belonging to the French legal tradition of civil law do better in human resources. We also observe no significant differences in terms of environmental protection among companies in civil and common law countries, which we attribute to a progressive convergence towards common industry sustainability standards
Corporate social responsibility and earnings forecasting unbiasedness
No full textWe investigate the relationship between corporate social responsibility (CSR) and I/B/E/S analysts’ earnings per share (EPS) forecasts using a large sample of US firms for 1992–2011. Based on literature findings, we decompose the CSR effect into four factors: accounting opacity, corporate governance, stakeholder risk, and overinvestment. We find that all of them significantly affect both the absolute forecast error on EPS and its standard deviation controlling for forecast horizon; number of analysts
and forecasts; and year, industry, and broker house effects. Consistently with our ex ante hypotheses, overinvestment, stakeholder risk, and accounting opacity have a positive effect, increasing both dependent variables, while corporate governance quality has a negative effect. A crucial aspect of our findings is that high CSR quality in terms of the four factors (i.e., accounting transparency, high corporate governance quality, stakeholder risk mitigation, and absence of verinvestment) contributes to making earnings forecasts unbiased as unbiasedness is generally met in the subsample of the Top CSR quality
companies and markedly violated in the subsample of the Bottom CSR companies. We also document that overinvestment and stakeholder risk are sufficient to produce this effect
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