Do Markets Value Corporate Social Responsibility in the United Kingdom?

46 Pages Posted: 3 Jan 2012  

Graham Buckingham

University of Exeter Business School - XFI Centre for Finance and Investment

Alan Gregory

University of Exeter - Xfi Centre; University of Exeter Business School

Julie M. Whittaker

University of Exeter Business School

Date Written: December 3, 2011

Abstract

In this paper, using corporate social responsibility (CSR) measures constructed from EIRIS data and mapped onto Environment, Employee and Community dimensions, as well as a Composite indicator, we show that all two out of the three dimensions of CSR, together with the Composite measure, are positively valued by markets. We show that these effects are robust to alternative deflation measures, and that CSR effects are manifested at least in part by an increased persistence in abnormal earnings. Finally we show that the long-run growth in residual income implied by prices is higher in the case of high CSR engagement firms compared to zero engagement firms for our Composite indicator. Overall, our results are consistent with CSR engagement enhancing shareholder value.

Keywords: Corporate Social Responsibility, Value Relevance, Shareholder Value

JEL Classification: G30, G32

Suggested Citation

Buckingham, Graham and Gregory, Alan and Whittaker, Julie M., Do Markets Value Corporate Social Responsibility in the United Kingdom? (December 3, 2011). Available at SSRN: https://ssrn.com/abstract=1978921 or http://dx.doi.org/10.2139/ssrn.1978921

Graham Buckingham

University of Exeter Business School - XFI Centre for Finance and Investment ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

Alan Gregory (Contact Author)

University of Exeter - Xfi Centre ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

University of Exeter Business School ( email )

Streatham Court
Xfi Building Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Julie M. Whittaker

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

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