Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures

20 Pages Posted: 19 Oct 2006

See all articles by Stephen J. Brammer

Stephen J. Brammer

University of Bath - School of Management

Chris Brooks

University of Reading - ICMA Centre

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

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Abstract

This study examines the relation between corporate social performance and stock returns in the UK. We closely evaluate the interactions between social and financial performance with a set of disaggregated social performance indicators for environment, employment, and community activities instead of using an aggregate measure. While scores on a composite social performance indicator are negatively related to stock returns, we find the poor financial reward offered by such firms is attributable to their good social performance on the environment and, to a lesser extent, the community aspects. Considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance can be rationalized by multi-factor models for explaining the cross-sectional variation in returns, but not by industry effects.

Suggested Citation

Brammer, Stephen and Brooks, Chris and Pavelin, Stephen, Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures. Financial Management, Vol. 35, No. 3, Autumn 2006. Available at SSRN: https://ssrn.com/abstract=938725

Stephen Brammer (Contact Author)

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 826826, ext. 5685 (Phone)

Chris Brooks

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Stephen Pavelin

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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