Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures

20 Pages Posted: 9 Jun 2005

See all articles by Stephen J. Brammer

Stephen J. Brammer

University of Bath - School of Management

Chris Brooks

University of Bristol - School of Economics, Finance and Management

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2005

Abstract

This study examines the relationship between corporate social performance and stock returns in the UK. Using a set of disaggregated social performance indicators for environment, employment and community activities, we are able to more closely evaluate the interactions between social and financial performance than would be the case for an aggregate measure. While scores on a composite social performance indicator are significantly negatively related to stock returns, we find that the poor financial reward offered by such firms is attributable to their good social performance on the employment and to a lesser extent the environmental aspects. Interestingly, we find that considerable abnormal returns are available from holding a portfolio of the socially least desirable stocks. These relationships between social and financial performance cannot be rationalised by multi-factor models for explaining the cross-sectional variation in returns or by industry effects.

Keywords: Corporate social responsibility, ethical investing, stock returns, trading rule performance

JEL Classification: G10, G14, M14, M20

Suggested Citation

Brammer, Stephen and Brooks, Chris and Pavelin, Stephen, Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures (June 2005). Available at SSRN: https://ssrn.com/abstract=739587 or http://dx.doi.org/10.2139/ssrn.739587

Stephen Brammer

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 826826, ext. 5685 (Phone)

Chris Brooks (Contact Author)

University of Bristol - School of Economics, Finance and Management ( email )

School of Accounting and Finance
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

Stephen Pavelin

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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