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Corporate Social Responsibility And Its Impact On Shareholder Value: Empirical Evidence of the Value of FTSE4Good Europe Index Membership

Siegmund, Stefanie LU and Witt, Matthias LU (2012) BUSN89 20121
Department of Business Administration
Abstract
We explore whether an investment in corporate social responsibility (CSR) is value creating for a firm’s shareholders. We start by establishing a relationship between CSR, corporate reputation and shareholder value. Assuming that membership in a recognized sustainability index signals a commitment to CSR to shareholders and potential investors, we explore both the short-term and intermediary impact on equity value for European firms that were added to, or deleted from, the FTSE4Good Europe Index between 2006 and 2011. Based on a sample of 92 additions and 67 deletions, we perform an event study with three event windows, including a pre-announcement period, an announcement period, and an effective period. Our results provide no statistical... (More)
We explore whether an investment in corporate social responsibility (CSR) is value creating for a firm’s shareholders. We start by establishing a relationship between CSR, corporate reputation and shareholder value. Assuming that membership in a recognized sustainability index signals a commitment to CSR to shareholders and potential investors, we explore both the short-term and intermediary impact on equity value for European firms that were added to, or deleted from, the FTSE4Good Europe Index between 2006 and 2011. Based on a sample of 92 additions and 67 deletions, we perform an event study with three event windows, including a pre-announcement period, an announcement period, and an effective period. Our results provide no statistical evidence that being added to the FTSE4Good Europe Index leads to a sustained increase in a firm’s equity value. Although we find a statistically significant decrease in equity value during the announcement period, the results provide no statistical evidence of a sustained decrease in the equity value for firms that were deleted from the FTSE4Good Europe Index firms. Based on our findings, we conclude that an investment in CSR to seek inclusion on a sustainability index, which requires corporate actions to comply with ambitious CSR standards, is barely creating nor destroying shareholder value. (Less)
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author
Siegmund, Stefanie LU and Witt, Matthias LU
supervisor
organization
course
BUSN89 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
Corporate reputation, FTSE4Good Europe Index, Financial performance, Event study, Corporate social responsibility (CSR), Shareholder value, Sustainability
language
English
id
2701552
date added to LUP
2012-06-15 09:33:34
date last changed
2012-06-15 09:33:34
@misc{2701552,
  abstract     = {We explore whether an investment in corporate social responsibility (CSR) is value creating for a firm’s shareholders. We start by establishing a relationship between CSR, corporate reputation and shareholder value. Assuming that membership in a recognized sustainability index signals a commitment to CSR to shareholders and potential investors, we explore both the short-term and intermediary impact on equity value for European firms that were added to, or deleted from, the FTSE4Good Europe Index between 2006 and 2011. Based on a sample of 92 additions and 67 deletions, we perform an event study with three event windows, including a pre-announcement period, an announcement period, and an effective period. Our results provide no statistical evidence that being added to the FTSE4Good Europe Index leads to a sustained increase in a firm’s equity value. Although we find a statistically significant decrease in equity value during the announcement period, the results provide no statistical evidence of a sustained decrease in the equity value for firms that were deleted from the FTSE4Good Europe Index firms. Based on our findings, we conclude that an investment in CSR to seek inclusion on a sustainability index, which requires corporate actions to comply with ambitious CSR standards, is barely creating nor destroying shareholder value.},
  author       = {Siegmund, Stefanie and Witt, Matthias},
  keyword      = {Corporate reputation,FTSE4Good Europe Index,Financial performance,Event study,Corporate social responsibility (CSR),Shareholder value,Sustainability},
  language     = {eng},
  note         = {Student Paper},
  title        = {Corporate Social Responsibility And Its Impact On Shareholder Value: Empirical Evidence of the Value of FTSE4Good Europe Index Membership},
  year         = {2012},
}