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An Event Analysis of Corporate Social Responsibility Ratings on Stock Prices

by Khoo, Adelynn

Abstract

Corporate social responsibility (CSR) and its effects on firms who choose to practice it is a growing topic of contention in the economics field. However, much of the studies previously done on the CSR and financial performance (CFP) relationship have been inconclusive. In this research, I used Thomas Reuter’s ESG ratings of CSR to do an event analysis of 100 different firms’ stock prices spanning a time period of ten years, 2007 to 2015. By looking at the percent change in CSR ratings and the percent change in stock prices on the day of ratings announcement, we can account for other factors that affect stock performance and isolate the influence of corporate social responsibility on stock prices. Results of multiple different regression models and robustness checks supported my hypothesis for a positive corporate social performance (CSP) and CFP relationship, in accordance with Stakeholder theory. Specifically, the environmental, social, and ESG ratings had a significant positive impact on stock price. Although the results show a positive relationship between corporate social responsibility and stock performance, the model was not the best fit for the data and therefore further research is necessary. With a more thorough understanding of the CSR-CFP relationship, firms can act accordingly and more efficiently, while ultimately improving their communities’ quality of life.

Note

The author has given permission for this work to be deposited in the Digital Archive of Colorado College.

Colorado College Honor Code upheld.

Includes bibliographical references.

Administrative Notes

The author has given permission for this work to be deposited in the Digital Archive of Colorado College.

Colorado College Honor Code upheld.

Copyright
Copyright restrictions apply.
Publisher
Colorado College Tutt Library
PID
coccc:27393
Digital Origin
born digital
Extent
41 pages : illustrations
Thesis
Senior Thesis -- Colorado College
Thesis Advisor
Kevin Rask
Department/Program
Economics and Business
Degree Name
Bachelor of Arts
Degree Type
bachelor
Degree Grantor
Colorado College Tutt Library
Date Issued
2017-05