The Mispricing of Socially Ambiguous Grey Stocks
15 Pages Posted: 8 Jan 2015 Last revised: 4 Jan 2017
Date Written: May 4, 2015
The study examines how stock market prices the stocks of socially ambiguous “Grey” firms, who are socially responsible in certain corporate social responsibility (CSR) dimensions while being socially irresponsible in other dimensions. Using firm data from 1992 to 2011, we find that the value-weighted “Grey” portfolio earns an annual abnormal return up to 3.6% relative to “Neutral” portfolio that consists of neither socially responsible nor irresponsible firms. Interestingly, “Community” and “Environment” sub-dimensions of CSR are the main drivers for the overpricing. The overpricing phenomenon is robust and is not driven by small firms, the “Sin” stocks or “Controversial” industries.
Keywords: Corporate Social Responsibility (CSR); Community; Controversial Industries; Environment; Socially Ambiguous Grey Stocks; Sin Stocks
JEL Classification: G02, G11, G12, G30
Suggested Citation: Suggested Citation