Abstract
This paper examines whether Socially Responsible Investment (SRI) Index constituent announcements have any impact on the returns of firms listing on the JSE SRI Index. The event study methodology is utilised to estimate abnormal returns for the firms included in the Index. The results indicate insignificant average abnormal returns (AARs) for the years 2004, 2006, 2007, 2008 and 2009, suggesting no significant shareholder gains over the entire event window. However, the year 2005 is associated with positive and significant abnormal returns. Post announcement cumulative average abnormal returns (CAARs) are positive for the years 2005 and 2007. However, the year 2008 exhibited extreme swings in CAARs with a general declining trend in the latter part of the event window. These swings are attributed to the global financial crisis of 2008. Furthermore, the cumulative returns for the total sample show no clear outperformance of the SRI over the JSE All Share Index.
Highlights
The Johannesburg Stock Exchange (JSE) implemented the Socially Responsible Investment (SRI) Index in May 2004
The SRI Index can be viewed as a credible Corporate Social Responsibility (CSR) signal for investors who wish to invest in a responsible manner
This paper adds to the existing empirical work by examining two issues: The first issue relates to whether JSE SRI Index constituent announcements have a significant effect on the abnormal returns of the firms listing on the Index for the years 2004-2009
Summary
The Johannesburg Stock Exchange (JSE) implemented the Socially Responsible Investment (SRI) Index in May 2004. The SRI Index can be viewed as a credible Corporate Social Responsibility (CSR) signal for investors who wish to invest in a responsible manner In pursuit of this argument, it is imperative to test whether SRI constituent announcements have a significant effect on the value of the firms listing on the Index. A notable empirical study that is closely related to this analysis was conducted by Viviers, Bosch, Smit and Buijs (2008) They examined the risk adjusted returns of various Responsible Investment (RI) funds in South Africa for the period 19922006, and found that, over time, RI fund performance improved relative to their benchmark indices. This paper adds to the existing empirical work by examining two issues: The first issue relates to whether JSE SRI Index constituent announcements have a significant effect on the abnormal returns of the firms listing on the Index for the years 2004-2009. Section four reports the main results, and Section five concludes the paper
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