Does It Really Pay to Do Better? Exploring the Financial Effects of Changes in CSR Ratings

Benlemlih, M., Jaballah, J., & Peillex, J. (2018). Does it really pay to do better? Exploring the financial effects of changes in CSR ratings. Applied Economics, 50(51), 5464-5482.

39 Pages Posted: 17 Apr 2020

See all articles by Mohammed Benlemlih

Mohammed Benlemlih

EM Normandie

Jamil Jaballah

affiliation not provided to SSRN

Jonathan Peillex

University of Picardy Jules Verne - CRIISEA

Date Written: July 11, 2018

Abstract

Previous literature on the link between corporate social responsibility (CSR) and financial performance has focused mainly on the financial implications of a firm’s level of CSR without considering the potential effects on financial performance of variations in CSR rating. We try to fill this gap by studying whether variations in a firm’s CSR rating affect systematic risk, firm value, and portfolio performance. First, our results show that an increase in firms’ CSR efforts, as reflected by an increase in their CSR ratings, significantly reduces systematic risk. Second, a positive variation in CSR ratings significantly improves firm value. Finally, from a portfolio perspective, a strategy that consists of buying stocks that have experienced a CSR ratings increase and selling stocks that have experienced a CSR ratings decrease (or remain stable) leads to lower financial performance. Taken together, our findings provide new evidence and financial implications for firms and portfolio managers.

Keywords: Corporate social responsibility; Extra-financial ratings; Firm risk; Firm value; Portfolio management

Suggested Citation

Benlemlih, Mohammed and Jaballah, Jamil and Peillex, Jonathan, Does It Really Pay to Do Better? Exploring the Financial Effects of Changes in CSR Ratings (July 11, 2018). Benlemlih, M., Jaballah, J., & Peillex, J. (2018). Does it really pay to do better? Exploring the financial effects of changes in CSR ratings. Applied Economics, 50(51), 5464-5482., Available at SSRN: https://ssrn.com/abstract=3560118

Mohammed Benlemlih (Contact Author)

EM Normandie ( email )

EM Normandie Business School, 64 Rue du Ranelagh,
Paris, Ile de France 57016
France
57016 (Fax)

Jamil Jaballah

affiliation not provided to SSRN

Jonathan Peillex

University of Picardy Jules Verne - CRIISEA ( email )

Pôle Universitaire Cathédrale
10 placette Lafleur BP 2716
Amiens, 80027
France

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