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Issue 5(1), October 2010 -- Paper Abstracts

Girard  (p. 9-22)

Cooper (p. 23-32)

Kunz-Osborne (p. 33-41)

Coulmas-Law (p.42-46)

Stasio (p. 47-56)

Albert-Valette-Florence (p.57-63)

Zhang-Rauch (p. 64-70)

Alam-Yasin (p. 71-78)

Mattare-Monahan-Shah (p. 79-94)

Nonis-Hudson-Hunt (p. 95-106)

JOURNAL OF ACCOUNTING AND FINANCE

ROE and Corporate Social Responsibility: Is There a Return On Ethics?

Author(s): Omid Sabbaghi, Min Xu

Citation: Omid Sabbaghi, Min Xu, (2013) "ROE and Corporate Social Responsibility: Is There a Return On Ethics?," Journal of Accounting and Finance, Vol. 13, Iss. 4, pp. 82 - 95

Article Type: Research paper

Publisher: North American Business Press

Abstract:

In light of the financial crisis of 2008, this study examines the return performance of U.S. companies that

exhibit high ratings for ethics and corporate social responsibility (CSR). The highly rated CSR firms are

identified via Corporate Responsibility (CR) Magazine’s Best 100 Corporate Citizens list for 2010,

known as one of the world’s top corporate responsibility ranking. We employ traditional event study

methodology to assess the effects of the CSR news announcement. In our study, we find that the return

performance of socially responsible firms exhibits similar time-series dynamics to that of a broad market

portfolio comprising of all NYSE, Nasdaq, and AMEX stocks. While several CSR firms may provide

exceptionally high returns, we find that on average, the socially responsible portfolio’s risk-return profile

does not differ significantly from that of the broad-based market portfolio. While we document a rise in

the cumulative abnormal return for the CSR portfolio prior to the news announcement, we find that the

upward drift in asset prices disappears following the announcement date and after controlling for

market-wide sources of risk. This study is one of the first investigations that focuses on the return

performance of CSR firms in the aftermath of the global financial crisis of 2008. Our results collectively

provide evidence in support of the Efficient Markets Hypothesis and suggest that the CSR rankings

announcement provided by Corporate Responsibility Magazine is indicative of good news for these firms.