Corporate Social Responsibility Stock Research Articles

The moderating role of tax avoidance on CSR and stock price volatility for oil and gas firms

PurposeThis study examines the impact of CSR (corporate social responsibility) on stock price volatility of oil and gas firms and, then identifies the moderating role of tax avoidance.Design/methodology/approachTo achieve the study's purposes, 330 observations are extracted from 30 oil and gas firms for the period between 2010 and 2020, and the estimation method of the Generalized Least Squares (GLS) is used. Actually, the CSR is proxied using the ESG (environmental, social, and governance) score, and the stock price volatility is measured by the degree of stock price variations over 12 months, according to the last 52 week's price.FindingsThe main findings indicate that CSR negatively impacts the stock price volatility. Nonetheless, this negative relationship is moderated positively by tax avoidance. This result is robust to the variation in the measure of volatility, namely the systematic risk.Practical implicationsThis research is helpful for investors to manage their portfolio risk as this article highlights the importance of engaging in sustainable development to reduce financial risk. This study also helps regulators and policymakers, such as environmental agencies and tax authorities, to reassess their control with oil and gas firms and record them according to their CSR practices, because this article emphasizes that it is not fair to pay taxes and engage in CSR practices at the same time.Originality/valueThe impact of CSR on stock price volatility is widely treated for firms. Nevertheless, the mechanisms that may affect this relationship are still seldom discussed. This study attempts to examine the impact of tax avoidance on the CSR–stock price volatility relationship for the oil and gas industry.

The Reactive Strategy During the COVID-19 Crisis: A New String to the Bow of CSR

This study aims to study the impact of the COVID-19 outbreak on stock market performance and determine whether firms with a reactive corporate social responsibility (CSR) strategy (compared to those with a proactive and strategic strategy) were less affected. Focusing on a sample of 217 French firms, the event study approach is applied to examine change in the stock prices of socially responsible firms at the announcement of COVID-19 as a pandemic. The results show that stock prices dropped significantly as a reaction to the COVID-19 outbreak, particularly for the proactive CSR group compared to the reactive CSR group. The results also show that the reactive CSR group resisted more in the longer term. Furthermore, an investment strategy aiming at buying reactive CSR firms and or selling proactive ones would have earned abnormal returns. However, the investment strategy is not fruitful when we consider reactive CSR stocks and strategic firms.

Performance of socially responsible firms during the COVID-19 crisis and trading behavior by investor type: Evidence from the Korean stock market

The COVID-19 pandemic in Korea provides grounds for understanding the effect of corporate social responsibility (CSR) on the stock returns and trading behavior of investors, particularly when most businesses have fallen on hard times. This study empirically finds that CSR reputations are associated with higher returns and lower volatilities by comparing the two portfolios which are composed of CSR and non-CSR firms, respectively. We also discover that public pension funds and other institutional investors have liquidated non-CSR stocks more aggressively than CSR stocks. This indicates that institutional investors consider CSR to transform their stock portfolios into less risky ones.

An Analysis on the NASDAQ’s Potential for Sustainable Investment Practices during the Financial Shock from COVID-19

There is a growing demand for sustainable business practices and for sustainable and impact investment as has been signaled by the Sustainable Development Goals ratified by all the United Nations members. However, there is not that much evidence on how sustainable investments perform during crises compared to regular investments. This paper investigates if sustainable investments within the NASDAQ have a lower volatility rate when reacting to a significant global crisis such as the COVID-19 pandemic. It groups the shares of businesses with Corporate Social Responsibility (CSR) practices that are ranked 70% or higher given by CSRHub, Inc. and compares it to business shares with the lowest-ranked CSR business practices at 30% or lower. The top 30% and bottom 30% CSR stocks’ volatility will be predicted using variations of the GARCH model. The top 30% CSR stocks of the NASDAQ had a lower rate of volatility for a global crisis than the bottom 30% CSR stocks. Technology is the only sector whose top 30% showed higher volatility. However, the top 30% of companies in the Health Care and Utilities sectors show a higher increase in returns and a lower drop in returns. These results signal the higher uncertainty associated with some cutting-edge products and services offered by the top 30% of technology companies and the preference for more established companies that offer higher quality services when it comes to satisfying basic needs such as health and utilities in difficult times.

Testing the Resilience of CSR Stocks during the COVID-19 Crisis: A Transcontinental Analysis

Investors and practitioners are increasingly concerned with financial assets within the scope of corporate social responsibility (CSR) meaning that, in recent times, such assets have become enshrined in the preferences of the new generations of investors and consumers. Just when the interest of investors was at its highest, SARS-CoV-2 (COVID-19) affected all international financial markets, so that, at first sight, it might seem that the financial assets assigned to CSR should have suffered collapses that were identical to the rest; however, our work shows the opposite, providing a comparative analysis of how the pandemic has affected the financial markets of each continent to demonstrate its outstanding resilience through the use of the Wavelets methodology. We analyzed the global impact of the registered cases of COVID-19 on the Dow Jones Sustainability World Index (DJSWI), the world’s leading indicator of sustainable companies, in addition to six other financial indices selected from each continent. The empirical results of this research show that the worldwide repercussions of the sudden outbreak of SARS-CoV-2 has had a substantially smaller effect on sustainability-related indices compared to the other considered indices. Similarly, the methodology employed allowed the establishment of a chronogram with details of the dating of COVID-19 expansion through the considered countries, a certain gradation in terms of the impact of the pandemic on these stock indices, and certain common guidelines describing their devastating effects on each of the financial markets represented by the indices in this research.

Corporate Social Responsibility Exposure and Performance of Mutual Funds

The authors study the performance consequences of exposure to corporate social responsibility (CSR) through stock holdings for mutual funds. Using a large sample of US domestic mutual funds, they find that funds overweighting low-CSR stocks outperform funds underweighting them by 1.7% to 2.6% annually. This outperformance, however, reverses during the 2008-2009 financial crisis. They also find similar performance patterns among stocks. An equal-weighted high-minus-low CSR stock return spread can explain the CSR-based fund performance spread, whereas a value-weighted spread cannot. These results are consistent with the interpretation that low-CSR funds overweight low-CSR small-cap stocks that offer high returns to investors who are averse to low-CSR investments. Investors tend to avoid low-CSR stocks due to either social norms against these stocks or risk of underperformance of these investments when overall trust in corporations suffers a negative shock (such as during a financial crisis).

Investor types and trading of the environment, social and governance stocks in the stock exchange of Thailand

This study involves finding how the Environmental Social and Governance (ESG) or the Corporate Social Responsibility (CSR) affects investors’ attention in the Stock Exchange of Thailand. The goal is to examine whether there is any interest in investing on the companies with ESG or CSR in the Stock Exchange of Thailand that are in the Environment Social and Governance 100 stocks by Thaipat (ESG100) or the Thailand sustainability investment by SET (TSI list), announced during 2014-2015. Conducting an event study, upon examination of these events, the result shows that there is a significant negative abnormal return of the TSI list. On the other hand, there are less significant negative abnormal returns after announcement for the ESG100 list. As the result, CAAR is very small for daily and yearly return, it is not economically significant and is not able to exploit the abnormal return for trading strategy. In addition, this research study further examines which type of investors are more concerned about the companies advocating for CSR and found that there is no significance in the result. Thus, there is not enough evidence to conclude which type concerns most on CSR stocks in TSI list.

Corporate Social Responsibility Exposure and Performance of Mutual Funds

We study the performance consequences of exposure to corporate social responsibility (CSR) through stock holdings for mutual funds. Using a large sample of U.S. domestic mutual funds, we find that funds overweighting low-CSR stocks outperform funds underweighting them by between 1.7% and 2.6% annually. This outperformance, however, reverses during the 2008-2009 financial crisis. We also find similar performance patterns among stocks. An equal-weighted high-minus-low CSR stock return spread can explain the CSR-based fund performance spread, whereas a value-weighted spread cannot. These results are consistent with the interpretation that low-CSR funds overweight low-CSR small-cap stocks that offer high returns to investors who are averse to low-CSR investments. Investors tend to avoid low-CSR stocks due to either social norms against these stocks or risk of underperformance of these investments when overall trust in corporations suffers a negative shock (such as during a financial crisis).

Do Markets Value Corporate Social Responsibility?

Renneboog, Ter Horst and Zhang (2008) highlight that the question of whether or not corporate social responsibility (CSR) is priced remains an open one. In this paper, using a comprehensive set of KLD indicators in Ohlson-model framework with robust two-way cluster analysis of standard errors, we show that indicators of corporate social responsibility are valued by markets. We also show that some valuation effects appear to be stronger in the post millennium period. Consistent with other evidence on implied cost of capital and CSR, we show that there are significant differences in factor loadings between high and low CSR stocks. Finally, we show that CSR effects are manifested at least in part by an increased persistence in abnormal earnings. Our evidence is consistent both with high CSR firms having a lower cost of capital and also with high CSR firms having lower expected adverse cash flow shocks.

Stock Market Reaction to the Global Financial Crisis: The Role of Corporate Governance and Product Quality Ratings in the Lehman Brothers' Event

We analyse with an event study approach the stock market reaction to one of the most important episodes in the global financial crisis (Lehman Brothers filing for chapter 11). Our inquiry on abnormal returns of about 2,700 stocks around the event date documents that the shock induces investors to incorporate insights from (or re-adjust the pre-event expected impact of) corporate social responsibility (CSR) ratings in stock evaluation in a sort of flight to CSR quality. The main CSR domains with significant effects on abnormal returns (corporate governance and product quality) are exactly those in which the defaulted company presented weaknesses according to its ex-ante CSR ratings. We also document that the reaction to the Lehman event extends beyond the event date and that investors rationally attribute more value to the direct information on strengths and weaknesses in each CSR rating domain than to affiliation/non affiliation to the CSR stock market index (FTSE KLD 400 Social Index). A more general result of our paper is that investors seem to discover, after the event, that CSR ratings provide original information which is not captured by traditional financial rating indicators.

Corporate Social Responsibility and Shareholder Effects: The Greek Paradigm

The study investigates the risk and return profile of a stock portfolio constructed of companies that consistently promote corporate social responsibility (CSR). The stock market behavior of these companies is analyzed and attention is paid on modeling dynamic volatility and assessing implications for shareholder value. It would be anticipated that corporate social responsible companies may exhibit a stable stock market behavior. However, the volatility model employed provides a statistical explanation of CSR stock risk and return. The impact of volatility is shown to be persistent though varying across the CSR sample. Shareholder value may fluctuate considerably and CSR stocks may not necessarily constitute a defensive asset class.

Corporate social responsibility and shareholder value implications

The study assesses the implications for shareholder value induced by investing in companies promoting corporate social responsibility (CSR) among members of the Greek CSR Firm Network which consistently pursues CSR strategies. Alternative dynamic volatility models to identify the best fit that adequately describes the risk-return profile of these stocks were estimated, while the EGARCH model which takes into account asymmetric volatility effects was found to be statistically satisfactory in explaining CSR risk and return. The impact of volatility appears to be persistent though varying across Greek CSR companies and shareholder value hence may fluctuate considerably, as CSR stocks may not necessarily present a low risk asset class