Corporate social performance and portfolio management

Abstract

Purpose

The purpose of this paper is to assess the existence of a relationship between socially responsible behavior of companies and price trends of their stocks.

Design/methodology/approach

The analysis is conducted by empirically testing data of environmental, social and governance ratings of a sample of European firms between December 2005 and December 2010. A disaggregate analysis is also performed to infer whether a specific contribution of all the different factors that make a business socially responsible can be observed in the value generation process.

Findings

The results show that the application of a sustainable approach are successful in creating value, both to the investor and the issuer companies.

Research limitations/implications

Findings of this work are significant with respect to portfolio management, because they suggest, on one hand, the myopia of a short-term approach (short-termism), and on the other hand, the importance of sustainable investing.

Originality/value

This paper focusses on the integration that has led many international groups to explicitly include extra-financial risk factors in their decision-making processes, by applying the by the four-factor model on a brand new data set.

Citation

Teti, E., Dell'Acqua, A., Etro, L.L. and Andreoletti, L.B. (2015), "Corporate social performance and portfolio management", Journal of Management Development, Vol. 34 No. 9, pp. 1144-1160. https://doi.org/10.1108/JMD-04-2015-0062