Research Handbook of Finance and Sustainability
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Research Handbook of Finance and Sustainability

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The severe consequences of the global financial crisis 2008-2009 and numerous accounting frauds and financial scandals over the last fifteen years have let to calls for more ethical and responsible actions in all economic activities including consumption, investing, governance and regulation. Despite the fact that ethics in business and corporate social responsibility rules have been adopted in various countries, more efforts have to be devoted to motivate and empower more actors to integrate ethical behavior and rules in making business and managerial decisions. The Research Handbook of Finance and Sustainability will provide the readers but particularly investors, managers, and policymakers with comprehensive coverage of the issues at the crossroads of finance, ethics and sustainable development as well as proposed solutions, while focusing on three different levels: corporations, investment funds, and financial markets.
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Chapter 2: CSR, market value and profitability: International evidence

Stevan Bajic and Burcin Yurtoglu


Three problems pose severe challenges to identify the impact of corporate social responsibility (CSR) on firm value and profitability. These are construct validity, limited data, and endogeneity. To deal with them we use a broad composite measure of CSR and panel data with firm fixed and random effects, plus extensive covariates. We analyze a global sample drawn from 35 countries over 2003–12 and find an economically significant relationship between the overall CSR measure and firm value, but little impact of CSR and profitability. The results are driven by the social subscore. We show that both omitted firm characteristics and omitted aspects of CSR can lead to omitted variable bias and in studies that focus on a single aspect of CSR the omitted variables bias can be severe.

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