Sufficiency Economy Philosophy and Firm Risks

Abstract

Using data from Thailand, we designed and created our Sufficiency Economy Philosophy score (SEP score) that measures the extent to which a firm is aligned with Sufficiency Economy Philosophy. We find that our SEP score has a negative relationship with firm-specific risk measured by the standard deviation of residuals from the market model. However we find no relationship between SEP score with neither market risk nor other measures of firms’ performance. The findings support the notion that alignment with Sufficiency Economy Philosophy could reduce risk without sacrificing performance, it leads to sustainability, and that Sufficiency Economy Philosophy practices are well aligned with shareholders’ interests.