Abstract
The Dow Jones Sustainability Index Chile (DJSI Chile) is made up of leading sustainability companies that are investing great effort into sustainable management. This study correlates the DJSI Chile with the financial indices (return on equity (ROE), return on assets (ROA), market value, earnings, and leverage) of companies that belong to the General Stock Price Index (IGPA) in Chile. The methodology used was quantitative, considering Chilean companies in the IGPA, including companies belonging to the DJSI Chile, applying a normality and correlation test based on the results. In conclusion, the study shows that in the results for the ROE, ROA, and leverage variables, there is no positive correlation with the DJSI Chile. However, the DJSI Chile is correlated with market value (for approximately 80% of the companies), and with earnings, there is a slightly higher correlation for the companies that belong to the DJSI Chile than for the remaining companies in the IGPA, thus if there exists a correlation between the DJSI Chile index and the variables market value and earnings, the index enables the prediction of those financial variables or predicts the finance indices (value market and earnings) of the companies that make up the DJSI Chile basing in the DJSI Chile index.
Highlights
The evolution of corporate social responsibility described by Soundararajan et al (2018) began in 1972, and it corresponded to activities that could be considered social activities
The theoretical foundation of this study was developed by verifying the most relevant categories on which this research focuses, which are associated with indices and variables linked to business sustainability, considering the Dow Jones Sustainability Index (DJSI) Chile is similar to FTSE4GOOD (Montoya-Cruz et al 2020) in that the inclusion of a company in the index is based on a range of corporate social responsibility criteria, the index is designed to measure the performance of companies demonstrating strong Environmental, Social, and Governance (ESG) practices
According to Charlo et al (2015), Chen et al (2018), and Lameira et al (2013), for the same level of risk, different benefits arise from the implementation of sustainable practices by companies; for example, there is a slightly higher correlation for earnings among companies that belong to the DJSI Chile than among companies that belong to the IGPA
Summary
The evolution of corporate social responsibility described by Soundararajan et al (2018) began in 1972, and it corresponded to activities that could be considered social activities. This evolution continued until the year 2000 when a strategic management orientation was implemented in companies, and corporate social responsibility (CSR) emerged as an excellent indicator of the legitimacy of a firm. Alzboun et al (2016) indicated that sustainable business practices do not reduce the level of financial results. It is expected that financial results will be reduced through sustainability practices over time. The positive impact generated by the incorporation of sustainable practices in the value of a company, mainly in countries that have strong protection for investors and high levels of disclosure, complements greater financial transparency
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