Sin Industry Research Articles

Stock Performance of the Cannabis Industry Compared to Other Sin Industries

Stock Performance of the Cannabis Industry Compared to Other Sin Industries

CSR-company fit in the sin industry: addressing negative contributions, NFC, and perceived motives

ABSTRACT Guided by the persuasion knowledge model, this study investigated how the fit between corporate social responsibility (CSR) and a sin company that makes negative societal contributions influences consumers’ responses. Specifically, using a sample of 234 Koreans, it examined whether individual differences in need for cognition (NFC) moderate CSR-company fit and how such NFC-moderated fit affects consumers’ responses through two distinct perceived motives (i.e. public-serving motive, self-serving motive). The analysis showed that NFC moderated the fit’s influence on perceived public-serving motives, perceived self-serving motives, and attitudes toward CSR. It also indicated that the NFC-moderated fit indirectly impacted attitudes toward CSR and positive word-of-mouth intentions via perceived public-serving motives.

Managing Meaning with Recruitment Efforts: Meaningfulness Portrayals by Companies in Sin Industries

Managing Meaning with Recruitment Efforts: Meaningfulness Portrayals by Companies in Sin Industries

Exclusion strategy in socially responsible investment: One size does not fit all

A better overlap between the exclusion set used by socially responsible investments (SRI) managers and individual preferences could lead to higher adoption of SRI, which is in turn expected to promote a more sustainable development. In the first study, we find an essential mismatch: both the US (n=472) and the UK (n=560) respondents did not adhere to the classification of some of the most commonly excluded sin industries as being sinful. In the second study on US investors (n=1020), we show that two-thirds of respondents are willing to pay 2.1% of their initial investment to choose which industries should be excluded. In comparison, the rest of the sample is willing to pay 2.5% to have a panel of experts decide for them. These results suggest the need to refine the exclusion strategies used by funds and update the list of industries typically excluded to promote SRI.

People and investor attention to climate change

The paper analyses whether people’s attention to climate change emergency contributes to the stock market returns by accounting for the mitigation role of the corporate social performance proxied by ESG score. We address one research question: how does climate change attention affect the investors’ trading behavior and, consequently, the stock price returns of local firms? The Google Search Volume Index (GSVI) is used to evaluate the attention parameter. In a global setting, made by 2941 stocks in both advanced and emerging economies between 2006 and 2019, we revealed that attention to climate change helps investors to have a significantly positive effect on returns of stocks with high ESG scores compared to low sustainable stocks. Moreover, we observe an interesting changing in the relationship between corporate social performance and people attention, when deepening the analysis from the perspective of sectorial distribution. Our results are robust to different risk factor models, environmental policy stringency framework, sin industries focus, and when changing people’s attention indicator.

Impact of Sin Industries’ CSR Activities on Firm Performance

Impact of Sin Industries’ CSR Activities on Firm Performance

Can “sin industries” prove their legitimacy through CSR reporting? A study of UK tobacco and gambling companies

PurposeThe purpose of this study is to examine the ways that sin industry companies attempt to utilise CSR reporting for legitimation.Design/methodology/approachConventional and summative content analyses were carried out on annual CSR reports in UK tobacco and gambling companies, juxtaposed against analysis of the actual behaviour of the companies, collectively and individually.FindingsThe paper concludes that there is an ongoing tension between the business of sin industry companies and their attempts to establish and maintain any legitimacy, using CSR reporting in particular ways to try to prove their credentials to society and to engage salient stakeholder support. Ultimately, they aim to give themselves the scope for strategic choice to enable survival and financial flourishing.Research limitations/implicationsFurther research on CSR on other sin industries and in other jurisdictions with different regulatory situations could shed further light on the achievement or denial of different types of legitimacy. Studying different time periods as industries change would be of value.Practical implicationsOn a practical basis, the study offers guidelines to stakeholders on the use of CSR reports from sin companies, and suggests the establishment of objective external CSR reports, overseen by accounting regulators.Social implicationsThe paper provides an overview of the role of sin industries in society, and mitigating their harms.Originality/valueThis study allowed for a comprehensive, dynamic and inclusive understanding of the interplay of CSR reporting and legitimacy by addressing conflicting interests between sin companies' social effects and inherent activities at the industry level. The methodology of multiple case study design in two sin industries combined content analysis of CSR reports, juxtaposed against analysis of behaviour in context. Previous research included the juxtaposition of actuality in analysis of only single case studies or particular issues. Thus, this research allows for a broader industry understanding. On a practical basis, the study offers guidelines to stakeholders on the use of CSR reports from sin companies, and suggests the establishment of objective external CSR reports, overseen by accounting regulators. At the social level, the paper provides an overview of sin industries in society, and mitigating their harms.

Signaling Consumer Impressions with CSR Support on Social Media: The Roles of Industry Stigma and Consumer Self-Disclosure

Through the impression management lens of consumers, this experimental study investigates when and how consumers regulate their images on social media through their divergent reactions to corporate social responsibility (CSR) advertising. Results show that consumers who disclose themselves infrequently and discriminately on social media (low self-disclosure) perceive the lower social value of CSR engagement in managing their impressions when CSR is for stigmatized industries (gambling) than nonstigmatized industries (amusement park). The degraded social value of CSR engagement is a psychological mediator underlying how consumers mitigate their engagement intention for stigmatized industries, which further leads to a lower intention to purchase cause-related products. However, consumers with high self-disclosure behavior perceive a high value from CSR engagement and actively engage in CSR regardless of industry stigma. The study highlights strategic approaches to social media and target segmentation for the sin industries to attenuate the blanket effect of industry stigma on their CSR advertising.

Political costs and corporate tax avoidance: Evidence from sin firms

The products and services of firms operating in sin industries (alcohol, tobacco, gambling, and firearms) run contrary to social norms and can produce significant negative externalities for society. As such, we expect that sin firms are at greater risk of incurring political costs in the form of additional regulation, higher excise taxes, or capital market intervention if they come under scrutiny for their income tax avoidance practices. Because of the nature of their products, regulators and policymakers are likely to face less pushback on new regulations or taxes on these firms. Sin firms start with a lower ability to influence the political process than firms in non-sin industries. Consequently, we hypothesize and find that sin firms exhibit less tax avoidance than non-sin firms, particularly through uncertain and more risky tax avoidance strategies. The negative relationship between the status of sin firms and tax avoidance is less pronounced in firms that accumulate political capital via intensive lobbying activities. Exploiting changes in partisan control of the Congress and White House, difference-in-differences tests show that firearm firms engage in less (more) tax avoidance when the Democrats (Republican) control both the Congress and White House. Overall, we conclude that political costs play an important role in corporate tax avoidance decisions.

Practical Applications of Is It Good to Sin When Times Are Bad?An Investigation of the Defensive Nature of Sin Stocks

In <b>Is It Good to Sin When Times Are Bad? <i>An Investigation of the Defensive Nature of Sin Stocks</i></b> from the October 2020 issue of <i>The Journal of Investing</i>, author <b>Greg Richey</b> (of the <b>University of California at Riverside</b>) examines a variety of so-called sin industries, individually and altogether, to evaluate their resistance to downside risk as compared with the S&amp;P 500 Index. Using an EGARCH model, Richey is able to show that negative market shocks, or “bad news events,” have a less negative impact on sin stock returns than do positive market shocks, or “good news events.” Using the VIX (also known as the <i>fear index</i>) for stock market volatility, he also indicates that VIX increases lead to delayed increases in anticipated volatilities for a mixed portfolio of various sin stocks. Overall, this makes sin stocks seem like a wise defensive choice for resisting negative shocks. <b>TOPICS:</b>Portfolio theory, portfolio construction, ESG investing

Shariah screening and corporate governance: The case of constituent stocks of Dow Jones US Indices

Shariah screening discards the firms that belong to impermissible business sectors (or sin industries) and follow capital structure with high debt and current assets. This study tests whether the firms passing Shariah screening have better (or worse) governance quality as compared to firms not subjected to Islamic screening. The screened firms may have lesser governance quality as they cannot use debt to discipline managers or achieve optimal capital structure. On the contrary, they may be better governed as these firms get higher presence of institutional investors and better analyst coverage. This paper provides comparison of governance quality of Shariah compliant (SC) firms in United States by using proprietary dataset of Dow Jones US Indices. The screened firms offer ground for a natural experiment as they pass negative ethical screening and meet financial criteria for the inclusion in the index. The findings suggest that the SC firms have lesser governance quality than Shariah Non-Compliant firms. The lower level of governance can be attributed to lower Size, lower Profitability, higher Dividend Payout, higher Total Risk and lower Free Cash Flow. Various robustness tests are performed to validate the findings and the results remained robust. These findings provide useful insights about the governance mechanism of SC firms that are emerging as an important alternative investment class in the last two decades.

Moral cleansing as hypocrisy: When private acts of charity make you feel better than you deserve.

What counts as hypocrisy? Current theorizing emphasizes that people see hypocrisy when an individual sends them "false signals" about his or her morality (Jordan, Sommers, Bloom, & Rand, 2017); indeed, the canonical hypocrite acts more virtuously in public than in private. An alternative theory posits that people see hypocrisy when an individual enjoys "undeserved moral benefits," such as feeling more virtuous than his or her behavior merits, even when the individual has not sent false signals to others (Effron, O'Connor, Leroy, & Lucas, 2018). This theory predicts that acting less virtuously in public than in private can seem hypocritical by indicating that individuals have used good deeds to feel less guilty about their public sins than they should. Seven experiments (N = 3,468 representing 64 nationalities) supported this prediction. Participants read about a worker in a "sin industry" who secretly performed good deeds. When the individual's public work (e.g., selling tobacco) was inconsistent with, versus unrelated to, the good deeds (e.g., anonymous donations to an antismoking cause vs. an antiobesity cause), participants perceived him as more hypocritical, which in turn predicted less praise for his good deeds. Participants also inferred that the individual was using the inconsistent good deeds to cleanse his conscience for his public work, and such moral cleansing appeared hypocritical when it successfully alleviated his guilt. These results broaden and deepen understanding about how lay people conceptualize hypocrisy. Hypocrisy does not require appearing more virtuous than you are; it suffices to feel more virtuous than you deserve. (PsycInfo Database Record (c) 2020 APA, all rights reserved).

Is It Good to Sin When Times Are Bad? An Investigation of the Defensive Nature of Sin Stocks

In this article, I use an EGARCH model to investigate whether a portfolio of sin stocks is less resistant to downside risk or losses during market downturns than is the S&P 500, a benchmark to approximate the market portfolio of risky stocks. In addition, I use the aforementioned model to analyze the defensive nature of individual sin industries (alcohol, tobacco, gambling, and defense) against the market portfolio. This article contributes to the existing literature on sin investing in two ways. First, my results illustrate the defensive nature of sin stocks and help reinforce the notion that sin stocks have some immunity from downside risk due to cyclical fluctuations and economic downturns. Second, I show results not only from a portfolio of sin stocks, but from various sin industries as well. The industry results highlight the defensive nature of sin stocks, an important component of their risk-adjusted returns. TOPICS:Portfolio theory, portfolio construction, ESG investing Key Findings • Bad-news events have a lesser impact on sin stock return volatility than do good-news events. • Increases in the volatility index (VIX) lead to increases in the overall volatility of sin stocks. • Sin stocks have had higher returns and Sharpe ratios than the market portfolio and sin industry funds’ returns have been less correlated with each other than they have been with the market portfolio.

Stigmatized Industries: Implications for Director Characteristics

In recent years, research has explored stigma at the organizational and industry level. However, most studies have exclusively explored sin industries which are subset of stigmatized industries. To advance a better understanding of how industry stigma can affect a firm, we explore the stigma literature to advance a better understanding of stigmatized industries and how operating in such industries can cause the organization to become stigmatized. In turn, when a firm experiences organizational stigma, members of the firm, such as the strategic leaders of the firm, can also become stigmatized. Specifically, we explore how the composition of boards of directors of firms in stigmatized industries differs from boards in non-stigmatized industries as a result of a restricted or altered director labor market. Theoretical propositions are developed related to board composition, director social capital and director pay.

Spreading the sin: An empirical assessment from corporate takeovers

An acquisition of a company involved in socially undesirable activities can have important value implications. On the one hand, stocks in sin industries can be undervalued, and positive wealth effects might be created through risk sharing and a halo effect. On the other hand, acquiring sin stocks could increase litigation risk and the chance of product boycotts, and could hurt relations with employees and other stakeholders. Moreover, many investors avoid investments in sin stocks by applying negative screening. This article empirically establishes that shareholders of acquirer firms on average discount sin acquisitions. The negative wealth effects are stronger in countries with a greater focus on corporate social responsibility and for deals that are more likely to receive public attention. The article concludes that the costs of “sin” are considerable.

Relative performance of religious and ethical investment funds

PurposeThis paper updates the literature regarding the performance of constrained US mutual funds by looking at the relative performance of Christian mutual funds, socially responsible funds and Islamic funds. This paper aims to rank the performance of religious and ethical investment funds.Design/methodology/approachThis study uses monthly returns from 2005 to 2015 to perform traditional asset pricing models as well as data envelopment analysis to determine rank.FindingsIslamic mutual funds outperform socially responsible funds, which then outperform Christian-based mutual funds; these results are also consistent during the latest 2007-2008 crisis period. The results are robust to different performance metrics and benchmarks. Moreover, this paper reports a significant amount of money “left on the table” by investing in constraint funds and disregarding the sin industry which shows an ethical dilemma for investors.Practical implicationsInvestors who seek to invest morally/ethically can be informed of the cost of doing so. They can also compare portfolio with others that have similar holdings and constraints.Originality/valueThis paper not only includes Christian mutual funds in the research but also provides the performance of all constrained assets. It also compares religious funds with “SIN” industry, and thus quantifies the cost of “doing right.”

Breaking bad: An investment in cannabis

This paper investigates the risk and return features of an investment in the cannabis industry. It further describes the current state of the market for cannabis and critically examines its potential future development. Findings show that a portfolio of cannabis stocks displays high volatilities and returns, but also low correlations and beta coefficients with regard to overall stock markets, other sin industries or cryptocurrencies. This makes it an interesting addition to financial portfolios.

Tone of earnings announcements in sin industries

PurposeThe purpose of this paper is to investigate the empirical association between the tone of earnings announcements and a company’s membership in a sin industry.Design/methodology/approachThis study constructs a model of the determinants of earnings announcement tone to examine the impact of sin industry membership on earnings announcement tone. An interaction term between CEO power (CEO–chairman duality) and sin industry membership is used to test whether CEO power moderates the strength of the association. The earnings announcements tone is measured using the spread in the proportion of positive and negative words. The category of sin industry includes not only industries such as tobacco, gambling and alcohol, but also industries associated with emerging environmental, social, and ethical issues (i.e. firearms, oil and cement).FindingsThe analysis of a sample of US firms from the 1994 to 2013 period shows that the tone of earnings announcement is less optimistic for companies in sin industries, but this association is weaker for companies that are led by powerful CEOs. The results remain robust to alternative definitions of sin industry membership and CEO power (CEO tenure) and to alternative model specifications.Originality/valueThe findings suggest that although sin companies cannot change the nature of their business, the management of such companies, in general, uses a less aggressive tone in their earnings announcements. These results further investors’ understanding of sin companies’ reporting behavior.

Does sin matter in corporate governance issues in the United States

PurposeThe authors provide evidence for the effects of social norms on corporate governance risk by studying “sin” stocks publicly traded companies involved in producing alcohol, firearms, biotechnology, gambling, military, nuclear power and tobacco. There is a societal norm against funding operations that promote vice and expropriation by controlling shareholders.Design/methodology/approachThe sample is representative of S&P 500 firms in 2014. The authors use Datastream to obtain a sample of sin stocks. The authors’ descriptive analysis is completed by four variations of the basic ordinary least squares regression model according to dependent variable corporate governance risk score.FindingsThe authors find that non-financial incentives alone do not explain corporate governance risk. The authors provide strong empirical support for an alignment of financial and non-financial incentives. The authors show that when sin firm’s current performance is good, suggesting that the market holds a positive belief in firm’s future profitability, managers will likely have more incentive to expropriate shareholders.Research limitations/implicationsBelonging of firm to a sin industry does not reflect the acceptance level of social norms. The evolution of social norms towards sin stocks overcomes the drawback of assuming a constant social norms level over time. Therefore, researchers are encouraged to use the changes in consumption of sin products as a proxy for the evolution of social norms and examine does sin matter in corporate governance issue in other countries.Practical implicationsWell-planned and well-managed philanthropy sin industries to creating education programmes for the disadvantaged to protecting the environment, in the name of corporate social responsibility has become a necessary ingredient in virtually every large corporation’s business plan.Originality/valueThis paper fulfils an identified need to study does sin matter issue in corporate governance issue.

Industry Specifics and Consumers’ Reactions to Business Crises

AbstractDifferent scientific studies provide many valuable recommendations how to manage crises in order to lessen their negative effect on relations with consumers. But the question whether the same business crises management rules can be applied for different industries, or they must be adapted depending on industries specifics, has not received sufficient scientific attention. Knowledge gaps about industry specific effect on consumer reactions to business crises remain. This study focuses on understanding the differences in consumers’ reactions in business crises situations with regard to controversial evaluation in the society of “the sin industries” (alcohol, tobacco, gambling, etc.) and ordinary industries (not having controversial associations). Experimental research design, including online experiment with tobacco, beer and functional soft drinks consumers (in total 306 respondents), was chosen for competing research hypotheses testing. Empirical evidence was in line with theoretical argumentation about less negative consumers’ reactions during business crises in case of “sin industries” versus ordinary industry. This study shows that consumers attitudes, such as perception of company’s product quality, trust, social responsibility and behavioural intentions, such as intention to buy and recommend company’s products, are less negative during business crises in lower reputation “sin industries” than in ordinary industries.