Corporate Social Irresponsibility and Portfolio Performance: A Cross-National Study

55 Pages Posted: 19 Oct 2020 Last revised: 20 Nov 2020

See all articles by Maretno A. Harjoto

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin; European Commission's Platform on Sustainable Finance

Qian Li

Cardiff Business School, Cardiff University

Date Written: August 29, 2020

Abstract

This study examines the impact of reputational risk, measured by corporate social irresponsibility (CSI) ratings, on shareholder abnormal returns. Based on 7,368 non-financial companies from 42 countries during 2007-2017, we find that long-short portfolios (buying no reputation risk and selling high reputation risk portfolios) earn significantly positive abnormal returns. The cross-national results indicate that the long-short portfolio returns are more pronounced (i) in the emerging market segment than in the developed market segment, (ii) in civil law jurisdictions than in their common law peers, (iii) within nations with higher confidence in corporations and, (iv) within nations with higher institutional trust.

Keywords: Corporate Social Irresponsibility; Developed Markets; Emerging Markets; Reputation Risk; Portfolio Approach

JEL Classification: G20; M14; G29

Suggested Citation

Harjoto, Maretno Agus and Hoepner, Andreas G. F. and Li, Qian, Corporate Social Irresponsibility and Portfolio Performance: A Cross-National Study (August 29, 2020). Journal of International Financial Markets, Institutions and Money, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3683170 or http://dx.doi.org/10.2139/ssrn.3683170

Maretno Agus Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin ( email )

Blackrock, Co. Dublin
Ireland

European Commission's Platform on Sustainable Finance ( email )

2 Rue de Spa
Brussels, 1000
Belgium

Qian Li (Contact Author)

Cardiff Business School, Cardiff University ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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