Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study

48 Pages Posted: 5 Feb 2009 Last revised: 11 Aug 2010

Date Written: April 20, 2009


This paper analyzes the impacts of index inclusions and exclusions on corporate sustainable firms by studying a sample of U.S. stocks that are added to or deleted from Dow Jones Sustainability World Index over the period 2002-2008. The impacts are measured in terms of stock return, risk and liquidity. We cannot find any strong evidence that announcement per se has any significant impact on stock return and risk. However, on the day of change, index inclusion (exclusion) stocks experience a significant but temporary increase (decrease) in stock return. Liquidity deteriorates after the announcement day and bounces back significantly near the day of change. Systematic risk shows any change after announcements. But idiosyncratic risk is higher after announcements. The overall results support Harris and Gurel (1986)’s price pressure hypothesis which posits that event announcement does not carry information and any shift in demand (and hence the corresponding price change and liquidity change) is temporary.

Keywords: Corporate sustainability, Dow Jones Sustainability Index, event study, the characteristic based benchmark model

JEL Classification: G14, G30

Suggested Citation

Cheung, Adrian, Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study (April 20, 2009). Journal of Business Ethics, Forthcoming, Available at SSRN:

Adrian Cheung (Contact Author)

Flinders University ( email )

GPO Box 2100
Adelaide S.A. 5001, SA 5063
+618 8201 5831 (Phone)

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