The Impact of CSR Ratings on Stock Prices - An event study on the impact of the publication of the Folksam Index of Corporate Social Responsibility on the share value of Swedish listed companies
Abstract: It has become increasingly common for Swedish listed companies to invest in CSR (Corporate Social Responsibility) to gain a competitive advantage. However, there are conflicting views as to how a company's corporate social responsibility affects its short-term stock value. This thesis aims to investigate how the announcement of a CSR rating affects stock prices of companies listed on the Stockholm Stock Exchange (Nasdaq OMX Stockholm), and whether any potential impact differs across industries. An event study was performed to measure the impact of the publication of the Folksam Index of Corporate Social Responsibility on stock prices. The twenty companies with the highest ratings, the twenty companies with the lowest ratings and the companies without a rating were selected each of the five years that the index has been released. Additionally, top-ranked and bottom-ranked firms for nine industries were analyzed. Cumulative abnormal returns were calculated after the publication to determine whether stock prices were affected by the release of the rating. The results conclude that, overall, a bottom ranking has a negative impact on a company's share price, whereas a top ranking has no effect. This impact, however, varies across industries.
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