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Most Ethical Companies and Stock Performance: Empirical Evidence

Sum, V. (2012). Most ethical companies and stock performance: empirical evidence. International Research Journal of Applied Finance, 3(8), 1286-1292.

8 Pages Posted: 16 May 2012 Last revised: 25 Sep 2012

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: May 16, 2012

Abstract

This paper provides empirical evidence from the capital market that ethical companies enjoy above-the-market-average performance. The analysis of risk premiums and risk adjusted returns of an equal-weighted portfolio of public firms ranked consecutively from 2007-2011 as the most ethical companies in the United States shows the average portfolio risk premiums are positive and greater than the market risk premiums for 3-year and 5-year holding period intervals; the average risk-adjusted excess returns are positive and statistically significant for the 3-year and 5-year holding period intervals. The implication of this study is that the firm’s commitment to be ethical will pay off in the long-turn, on average.

Keywords: Risk premiums, risk adjusted excess returns, most ethical companies

JEL Classification: G11, G12, G14

Suggested Citation

Sum, Vichet, Most Ethical Companies and Stock Performance: Empirical Evidence (May 16, 2012). Sum, V. (2012). Most ethical companies and stock performance: empirical evidence. International Research Journal of Applied Finance, 3(8), 1286-1292.. Available at SSRN: https://ssrn.com/abstract=2060751 or http://dx.doi.org/10.2139/ssrn.2060751

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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