Measuring the Social Responsibility Discount for the Cost of Equity Capital: Evidence from Benefit Corporations

The Journal of Behavioral Finance & Economics, 3 (2), 55-75 (2013).

19 Pages Posted: 9 Sep 2012 Last revised: 24 Jun 2014

See all articles by Craig R. Everett

Craig R. Everett

Pepperdine University - Graziadio School of Business and Management

Date Written: Feburary 20, 2013

Abstract

In 2010, Maryland became the first state to allow firms to incorporate as “benefit corporations,” which are for-profit entities with a social purpose. Since then, nineteen other states have followed. Using survey data from the population of 94 benefit corporations existent at the time of the survey, this paper directly measures the “social responsibility discount” – the degree to which investors in a benefit corporation have a lower required return on equity than they would have for traditional firms. This paper finds that the discount is approximately 35%. This paper also provides unique descriptive statistics about benefit corporations and their founders.

Keywords: Cost of Capital, Private Capital Markets, Benefit Corporations, Social Enterprise, Corporate Social Responsibility, Socially Responsible Investing

JEL Classification: G02, G30, L21, M13, M14

Suggested Citation

Everett, Craig R., Measuring the Social Responsibility Discount for the Cost of Equity Capital: Evidence from Benefit Corporations (Feburary 20, 2013). The Journal of Behavioral Finance & Economics, 3 (2), 55-75 (2013).. Available at SSRN: https://ssrn.com/abstract=2143414 or http://dx.doi.org/10.2139/ssrn.2143414

Craig R. Everett (Contact Author)

Pepperdine University - Graziadio School of Business and Management ( email )

24255 Pacific Coast Hwy
Malibu, CA 90263
United States
(310) 506-8543 (Phone)

HOME PAGE: http://bschool.pepperdine.edu/faculty/default.php?faculty=craig_everett

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