Corporate social responsibility performance communication and portfolio management

Abstract

Purpose

The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) performance communication and stocks’ performance using socially responsible investment (SRI) portfolio management approach.

Design/methodology/approach

The authors used the multi-factors models to examine the impact of CSR performance communication on the ex post monthly returns of three distinctly formed portfolios as well as their differential performance from 2001 to 2013 in a small economy of New Zealand.

Findings

The results show that SRS portfolio comprising of the stocks that demonstrate a relatively less proactive approach to the social and environmental concerns outperforms a stock portfolio that comprises of companies that have a relatively proactive approach to stakeholder engagement referred to as SVS portfolio. Furthermore, the authors’ findings show a positive relationship between social performance and market valuation. This indicates that the market values more stakeholder engagement in regard to social issues than environmental issues.

Research limitations/implications

The authors’ findings imply that the SRI does make perfect financial sense in a small economy such as New Zealand. The perception of the CSR communication as an “insurance” for mitigation of social and environmental risks is one of the factors driving the valuation of SRI portfolios in New Zealand.

Originality/value

The authors collected CSR data from the publicly available sources such as the annual reports, the CSR reports and sustainability reports because a layman investor is more likely to rely on these sources in a small economy.

Citation

Ameer, R. and Othman, R. (2017), "Corporate social responsibility performance communication and portfolio management", Managerial Finance, Vol. 43 No. 5, pp. 595-613. https://doi.org/10.1108/MF-06-2016-0164