Corporate Equality and Equity Prices: Doing Well While Doing Good?

Two competing hypotheses, value enhancing and value discounting, state that implementing socially responsible corporate policies can have positive or negative effects on firm value. This paper tests how a specific type of social responsibility–corporate equality–affects firm value. Corporate equality is measured by the corporate equality index (CEI). This index quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Using a sample of CEI-rated, publicly traded firms in the U.S., we find that, between 2002 and 2006, firms with a higher degree of corporate equality have higher stock returns and higher market valuation (Q). We provide suggestive, causal evidence that corporate equality enhances firm value through better performance in product markets and labor markets: Firms with a higher degree of corporate equality also tend to have larger sales, higher profit margins, higher employee productivity, and attract more employees. These results are robust to the inclusion of unobserved firm-heterogeneities. Overall, our results support the value-enhancing effects of corporate social responsibility.Corporate equality; social responsibility; socially responsible investment; stock returns; performance.

Corporate equality and equity prices: Doing well while doing good?

Two competing hypotheses, value enhancing and value discounting, state that implementing socially responsible corporate policies can have positive or negative effects on firm value. This paper tests how a specific type of social responsibility–corporate equality–affects firm value. Corporate equality is measured by the corporate equality index (CEI). This index quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Using a sample of CEI-rated, publicly traded firms in the U.S., we find that, between 2002 and 2006, firms with a higher degree of corporate equality have higher stock returns and higher market valuation (Q). We provide suggestive, causal evidence that corporate equality enhances firm value through better performance in product markets and labor markets: Firms with a higher degree of corporate equality also tend to have larger sales, higher profit margins, higher employee productivity, and attract more employees. These results are robust to the inclusion of unobserved firm-heterogeneities. Overall, our results support the value-enhancing effects of corporate social responsibility.Corporate equality; social responsibility; socially responsible investment; stock returns; performance

Agglomeration Economies and Local Comovement of Stock Returns

Existing studies in finance have documented the comovement of stock returns of companies headquartered in the same location. The interpretation is that local investors have a “local bias” due to an information advantage on local companies. This paper argues that localized agglomeration economies affect the fundamentals of local companies, resulting in the local comovement of stock returns. Using the data for China A-share listed companies from 1997-2007, we confirm the local comovement of stock returns of companies headquartered in the same city; moreover, the stock returns of a company headquartered in a city with stronger agglomeration economies are also correlated more highly with stock returns of other companies headquartered in the same city. The local comovement of earnings among companies headquartered in the same city is also found, and the local comovement of stock returns is correlated with the local comovement of earnings. We conclude that correlated local fundamentals due to localized agglomeration economies can explain the local comovement of stock returns.Stock returns; Local bias; Agglomeration economies

Biodiversity shapes tree species aggregations in tropical forests

Spatial patterns of conspecific trees are considered as the consequences of biological interactions and environmental influences. They also reflect species interactions in plant communities. However, biological attributes are often neglected while deliberating the factors shaping species distributions. As rising attentions are paid to spatial patterns of tropical forest trees, we noticed that seven Center of Tropical Forest Sites and four Forest Dynamic Plots in Asia and America have presented analogously high proportions of species with aggregated conspecific individuals coincidently. This phenomenon is distinctive and repudiates fundamental ecology hypotheses which suggested dispersed distributions of conspecific tropical trees due to intensive density and natural enemy pressures in tropical forests. We believe that similar aggregation patterns shared by these tropical forests implies the existence of structuring forces in biogeographical scale instead of habitat heterogeneity in local community scales as scientists have considered. To approach the factors contributing to this cross-continent spatial pattern of trees, we obtained and reviewed ecosystem attributes, including topography, temperature, precipitation, biodiversity, density, and biomass, of these forests. Here we show that the proportions of aggregated species are actually constants independent of any ecosystem attributes regardless the nature of these tropical forests. However, local biodiversity are the major factor determining the number of aggregated species and the aggregation of large individuals of these forests. Aggregation of large trees declines along rising biodiversity, while the numbers of aggregated species increase permanently along lifting biodiversity. We propose a possible equilibrium and saturated status of the tropical forests in accommodating aggregated species. Furthermore, the tight correlations of biodiversity and species aggregation strongly imply the importance of overlooked biological interactions in shaping the spatial patterns in the tropical forests