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The effect of CSR on stock performance: new evidence for the USA and Europe


von Arx, Urs; Ziegler, Andreas (2008). The effect of CSR on stock performance: new evidence for the USA and Europe. In: 16th Annual Conference 2008 of the European Association of Environmental and Resource Economists (EAERE 2008) , Gothenburg, Sweden, 25 June 2008 - 28 June 2008.

Abstract

This paper provides new empirical evidence for the effect of corporate social responsibility (CSR) on corporate financial performance. In contrast to former studies, we examine two different regions, namely the USA and Europe. Our econometric analysis shows that envi-ronmental and social activities of a firm compared with other firms within the industry are valued by financial markets in both regions. However, the respective positive effects on av-erage monthly stock returns between 2003 and 2006 appear to be more robust in the USA and, in addition, to be nonlinear. Our analysis furthermore points to biased parameter esti-mations if incorrectly specified econometric models are applied: The seemingly significantly negative effect of environmental and social performance of the industry to which a firm be-longs vanishes if the explanation of stock performance is based on the Fama-French three-factor or the Carhart four-factor models instead of the simple Capital Asset Pricing Model.

This paper provides new empirical evidence for the effect of corporate social responsibility (CSR) on corporate financial performance. In contrast to former studies, we examine two different regions, namely the USA and Europe. Our econometric analysis shows that envi-ronmental and social activities of a firm compared with other firms within the industry are valued by financial markets in both regions. However, the respective positive effects on av-erage monthly stock returns between 2003 and 2006 appear to be more robust in the USA and, in addition, to be nonlinear. Our analysis furthermore points to biased parameter esti-mations if incorrectly specified econometric models are applied: The seemingly significantly negative effect of environmental and social performance of the industry to which a firm be-longs vanishes if the explanation of stock performance is based on the Fama-French three-factor or the Carhart four-factor models instead of the simple Capital Asset Pricing Model.

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Additional indexing

Item Type:Conference or Workshop Item (Speech), refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
03 Faculty of Economics > Center for Corporate Responsibility and Sustainability
Dewey Decimal Classification:330 Economics
Language:English
Event End Date:28 June 2008
Deposited On:26 Feb 2009 14:22
Last Modified:05 Apr 2016 13:07
Additional Information:Dieses Paper wurde auch präsentiert an der 23rd Annual Conference of the European Economic Association (EEA 2008), Milan, Italy, 27-31 August 2008.
Official URL:http://www.eaere2008.org/
Related URLs:http://www.eea-esem2008.org/
http://www.ccrs.uzh.ch/images/wp0408_Ziegler_vonArx_The_Effect_of_CSR.pdf
Permanent URL: http://doi.org/10.5167/uzh-16749

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