Abstract

http://ssrn.com/abstract=2222897
 
 

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Stakeholder Relations and Stock Returns: On Errors in Expectations and Learning


Arian C.T. Borgers


Tilburg University; Tilburg Sustainability Center

Jeroen Derwall


Maastricht University - European Centre for Corporate Engagement; Tilburg University - School of Economics; Maastricht University - Department of Finance

Kees C. G. Koedijk


Tilburg University - Department of Finance

Jenke Ter Horst


Tilburg University - Center for Economic Research (CentER)

March 1, 2013

UCD & CalPERS Sustainability & Finance Symposium 2013

Abstract:     
A significant number of institutional investors publicly state the belief that corporate stakeholder relations are associated with firm value in a manner that the financial market fails to understand. We investigate whether stakeholder information predicted risk-adjusted returns due to errors in investors’ expectations and ultimately ceased to do so as attention for such information increased. We build a stakeholder-relations index (SI) for a wide range of U.S. firms over the period 1992-2009 and provide evidence that the SI explained errors in investors’ expectations about firms’ future earnings. The SI was positively associated with long-term risk-adjusted returns, earnings announcement returns, and errors in analysts’ earnings forecasts over the period 1992-2004. However, as attention for stakeholder issues became more widespread, subsequently, these relationships diminished considerably. The results are consistent with the idea that increased investor attention for stakeholder issues eventually eliminates mispricing.

Number of Pages in PDF File: 49

Keywords: Socially Responsible Investing, ESG, Stakeholders, Stock Return, Errors in Expectations, Learning

JEL Classification: G10, G12, G14

working papers series


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Date posted: February 23, 2013 ; Last revised: April 16, 2013

Suggested Citation

Borgers, Arian C.T. and Derwall, Jeroen and Koedijk, Kees C. G. and ter Horst, Jenke, Stakeholder Relations and Stock Returns: On Errors in Expectations and Learning (March 1, 2013). UCD & CalPERS Sustainability & Finance Symposium 2013. Available at SSRN: http://ssrn.com/abstract=2222897 or http://dx.doi.org/10.2139/ssrn.2222897

Contact Information

Arian Borgers
Tilburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
(+31) 134663077 (Phone)
HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=a.c.t.borgers
Tilburg Sustainability Center ( email )
P.O. Box 90153
Tilburg, North Brabant 5000 LE
Netherlands
HOME PAGE: http://www.tilburguniversity.edu/research/institutes-and-research-groups/tsc/people/
Jeroen Derwall (Contact Author)
Maastricht University - European Centre for Corporate Engagement ( email )
FEBA
Tongersestraat 53
Maastricht, Limburg 6200MD
Netherlands
HOME PAGE: http://www.corporate-engagement.com/
Tilburg University - School of Economics ( email )
P.O. Box 90153
NL-5000 LE Tilburg, Brabant
Netherlands
HOME PAGE: http://www.tilburguniversity.nl/webwijs/show/?uid=j.m.m.derwall
Maastricht University - Department of Finance ( email )
Maastricht, 6200 MD
Netherlands
HOME PAGE: http://www.fdewb.unimaas.nl/finance/?page=member&id=175
Kees G. Koedijk
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)
Jenke R. Ter Horst
Tilburg University - Center for Economic Research (CentER) ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
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