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 4: Disentangling financial and ethical effects of corporate social responsibility on firm value

Sylvain Marsat, Guillaume Pijourlet and Benjamin Williams

Abstract

Do investors prefer the stocks of firms that exhibit a high degree of CSR? The bulk of empirical studies use market data to assess the financial value of CSR and are not able to disentangle the financial and ethical effects of corporate social responsibility on firm value. Based on an experimental design, we show that subjects asked to assess stocks tend to overvalue, by one-third on average, the stock of a company with an AAA CSR rating compared to when they do not have access to this information. We controlled for the fact that the increase in fundamental value is the consequence of a purely ethical behavior and not a disguised financial one. Furthermore, a poor CSR rating does not seem to be penalized.

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