Religion and returns in Europe

Drawing on social identity and social impact theory, this paper is the first to investigate the impact of religious preferences on share prices and expected returns at the country level. Using data from 12 European countries, our findings suggest that religion has a significant effect on the share price of companies whose activities are considered unethical, i.e., tobacco manufacturers and alcohol producers. The share price of these companies (called sin stocks) is depressed when they are located in a predominantly Protestant environment (relative to a Catholic environment). With investors in Protestant countries being more sin averse than in Catholic countries, they insist upon higher expected returns on sin stocks. Conversely, religious preferences do not have the same impact on the performance of other companies, e.g. socially responsible companies. Our results are robust to various methodologies and controlling for several firm-specific, industry-specific and country-specific characteristics

Socially responsible investing and stock performance: New empirical evidence for the US and European stock markets

This paper empirically examines the theoretically ambivalent relationship between socially responsible investing (SRI) and stock performance. It contributes to the existing literature by considering both the US and the entire European stock markets and by using consistent world-wide corporate sustainability performance data. Our portfolio analysis from 1998 to 2009 is based on the common four-factor model according to Carhart (1997), which comprises market return, size, value, and momentum factors. We show for the US and the European stock markets that SRI is associated with large-sized firms. The insignificant abnormal stock returns for SRI in both regions are the main result of our paper. Therefore, our study supports the view that SRI stocks are correctly priced by market participants, although we cannot rule out that a corresponding mispricing has existed before the beginning of our observation period in 1998

Performative Work: Bridging Performativity and Institutional Theory in the Responsible Investment Field

Callon’s performativity thesis has illuminated how economic theories and calculative devices shape markets, but has been challenged for its neglect of the organizational, institutional and political context. Our seven-year qualitative study of a large financial data company found that the company’s initial attempt to change the responsible investment field through a performative approach failed because of the constraints posed by field practices and organizational norms on the design of the calculative device. However, the company was subsequently able to put in place another form of performativity by attending to the normative and regulative associations of the device. We theorize this route to performativity by proposing the concept of performative work, which designates the necessary institutional work to enable translation and the subsequent adoption of the device. We conclude by considering the implications of performative work for the performativity and the institutional work literatures

Corporate Social Responsibility and Corporate Financial Performance: Evidence from Korea

This paper studies the empirical relation between corporate social responsibility (CSR) and corporate financial performance in Korea using a sample of 1122 firm-years during 2002-2008. We measure corporate social responsibility by both an equal-weighted CSR index and a stakeholder-weighted CSR index suggested by Akpinar et al. (2008). Corporate financial performance is measured by ROE, ROA and Tobin’s Q. We find a positive and significant relation between corporate financial performance and the stakeholder-weighted CSR index, but not the equal-weighted CSR index. This finding is robust to alternative model specifications and several additional tests, providing evidence in support of instrumental stakeholder theory

Environmental and financial performance in the European manufacturing sector: an analysis of extreme tail dependency

In this study, we investigate the impact of environmental performance on financial performance. We argue that environmental performance heterogeneously affects firms with different profitability level. Using data for 288 European manufacturing firms over the period 2005-2016, we investigate the said relationship under the financial slack argument and the contrasting paradigms of neoclassical and the instrumental stakeholder theory. Employing a quantile regression framework enriched with a set of instrumental variables to more effectively approximate environmental performance, we find (i) firms with superior environmental performance tend to be more profitable; (ii) the relationship between environmental and financial performance can be characterised as positive and heterogeneous across the conditional distribution; (iii) financial and environmental performance are endogenously related only when high profitability firms are examined