do non socially responsible companies achieve legitimacy through socially responsible actions the mediating effect of innovation this study investigates the effects on organization s financial performances of first the extent to which the organizations are involved in controversial business activities and second their level of social performance these companies can be considered non socially responsible given the harmful nature of the activities they are involved in managers of these companies may still have incentives to pursue socially responsible actions if they believe that engaging on those actions will help them to achieve legitimacy and improve investors perception about them we develop a comprehensive methodology to investigate these corporate social performance csp related effects in a complex but specific setting to this end we analyze a sample of 202 us firms for the period 2005 2008 using a novel method in this area partial least squares our results indicate that contrary to the general findings in prior literature companies involved in controversial business activities which engage in csp do not directly reduce the negative perception that stakeholders have about them instead we found evidence of a positive mediation effect of csp on financial market based performance through innovation

the earnings and human capital of american jews this paper analyzes the earnings and returns from human capital investments of second generation american jews compared with non jews jewish men have 16 percent higher earnings other things the same a 20 percent higher rate of return from schooling and a steeper experience earnings profile these patterns persist even after controlling for occupation self employment status and geographic concentration in the new york area there are no systematic differences among jews by parents country of birth the findings suggest that american jews are more productive in creating and using human capital and that this has encouraged greater investments in human capital

on the validity of environmental performance metrics different proprietary databases have been used extensively in research to assess the environmental performance and environmental risk of companies this study explores the convergent validity of the environmental ratings of msci esg stats formerly known as kinder lydenberg and domini research analytics kld thomson reuters asset4 asset4 and global engagement services ges the study shows that the ratings have common dimensions but on aggregate they do not converge on the environmental opportunity side kld environmental strengths and asset4 and ges environmental performance metrics correlate highly and provide convergent scores for us companies from 2003 2011 on the environmental risk side kld environmental concerns converge with the ges environmental industry risk and company emissions from the asset4 database further analysis confirms that industry related risks are drivers of company specific environmental performance

putting sustainable investing into practice a governance framework for pension funds this article presents a framework intended to provide pension funds with practical guidance for the successful implementation of a sustainable investing strategy the framework is developed with respect to the uk and us pension funds as these share certain common legal characteristics and focuses on the changes that pension funds adopting such a strategy should make to their investment strategies and governance particularly through the formulation and articulation of clear investment mission and strong investment beliefs the article proceeds with a review of socially responsible investment sri and more recent responsible investment ri literature in the context of growing public awareness but not necessarily understanding of the concept of sustainability literature review of sri field sri ri and sustainable investing section it then examines the literature on pension fund governance arguing the need for more detailed practical guidance for funds moving towards sustainable investing especially for those implementing a sustainable investing strategy anglo american pension fund governance section it presents the framework for the practical implementation of sustainable investing in the sustainable investing framework section finally we review the relevant anglo american legal backdrop outlining how pension funds adopting our framework should approach their fiduciary obligations and then discussing potential regulatory enablers of sustainable investment legal context barriers to and enablers of sustainable investing section

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

is corporate social responsibility performance associated with tax avoidance this study examines whether corporate social responsibility performance is associated with corporate tax avoidance employing a matched sample of 434 firm year observations i e 217 tax avoidant and 217 non tax avoidant firm year observations from the kinder lydenberg and domini database over the period 2003 2009 our logit regression results show that the higher the level of csr performance of a firm the lower the likelihood of tax avoidance our results indicate that more socially responsible firms are likely to display less tax avoidance finally the results from our additional analysis show that the csr categories community relations and diversity represent particularly important elements of csr performance that reduce tax avoidance

driven to be good a stakeholder theory perspective on the drivers of corporate social performance despite growing evidence of the benefits to a firm of improving corporate social performance csp many firms vary significantly in terms of their csp activities this research investigates how the characteristics of the stakeholder landscape influence a firm s csp breadth using stakeholder theory we specifically propose that several factors increase the salience and impact of stakeholders demands on the firm and that in response to these factors a firm s csp will have greater breadth a firm s csp breadth is operationalized as the number of different sub domains of csr for which a firm has taken positive actions and is captured using a unique dataset from kinder lydenburg and domini kld this data set includes positive and negative firm actions across more than 35 different dimensions of socially responsible behavior findings based on a longitudinal multi industry sample of 447 us firms during the period from 2000 to 2007 demonstrate that firms which 1 have greater sensitivity to stakeholder needs as a result of the firm s strategic emphasis on marketing and or value creation 2 face greater diversity of stakeholder demands and 3 encounter a greater degree of scrutiny or risk from stakeholder action have a greater breadth of csp in response to the stakeholder landscape that they face

stakeholder pressures as determinants of csr strategic choice why do firms choose symbolic versus substantive self regulatory codes of conduct to encourage corporations to contribute positively to the environment in which they operate voluntary self regulatory codes src have been enacted and refined over the past 15 years two of the most prominent are the united nations global compact and the global reporting initiative in this paper we explore the impact of different stakeholders pressures on the selection of strategic choices to join srcs our results show that corporations react differently to different sets of stakeholder pressures and that the src selection depends on the type and intensiveness of the stakeholder pressures as well as the resources at hand to respond to those pressures our contribution offers a more specific and finely variegated analysis of firm stakeholder interactions

responsible investing of pension assets links between framing and practices for evaluation despite the increase in the acceptance of responsible investing ri in general allianz in www allianzglobalinvestors com 2010 the global community is still witnessing unprecedented levels of practices that can only be categorized as unsustainable it appears then that either the inroads made by the ri community have not kept up with the increase in unsustainable practices or that the ri process itself has been ineffective at producing meaningful change the current study aims to investigate the practices used by pension plan sponsors to determine how they may enable or interfere with the adoption of implementation of ri we adopt framing theory benford and snow annual review of sociology 26 611 639 2000 specifically the idea that particular frames find alignment when they resonate with their targets by either bridging extending amplifying or transforming a domain we extend research to include understudied practices by performing an analysis of 60 public pension funds in canada we find evidence of disconnect between the financial frame which dominates practices for compliance and evaluation and the social frame of ri as a source of change if the aim of ri is to produce long term change then a consideration of whether it aligns with extant practices is critical we discover a variety of frame alignment tactics already employed in practice we also find that even within the dominant financial frame opportunities for frame extension amplification and transformation do exist and examine how these are more or less possible depending on how the asset management structure is designed

being good while being bad social responsibility and the international diversification of us firms this paper contributes to the discussion on international diversification and corporate social responsibility csr by suggesting that firms can be simultaneously socially responsible and socially irresponsible to test our assertions we analyze data from 222 publicly traded us firms from 1993 to 2003 the findings support our hypotheses and have significant implications for the way in which we conceptualize csr

compensating outside directors with stock the impact on non primary stakeholders two obvious trends in corporate governance include broadening board accountability beyond shareholders interests and paying outside directors with equity compensation stock and stock options by integrating common agency and instrumental stakeholder theories we examine the effect of stock compensation on secondary stakeholders and a firm s participation in social issues two areas where interests are less aligned with shareholder value consistent with our predictions we found that while stock compensation may be an effective way to align directors goals to those of shareholders it has adverse effects on important non shareholder constituencies in the company s operating environment

three ethical roots of the economic crisis on sept 15 2008 dark monday the world witnessed a radical reshaping of wall street lehman brothers fell toward bankruptcy merrill lynch was sold to its rival bank of america and aig pleaded for 40 billion in government relief those calamities marched in step with a dismal parade including the us government takeover of fannie mae and freddie mac the bailout of bear stearns and the entire subprime debacle we rightly blame wall street leaders for bungling business decisions for misestimating risk and overloading banks with single strategy investments we now are living with the aftermath of these business mistakes but how about ethical mistakes were they too part of the crisis of course we need and certainly will get more robust regulation we have been reminded that banks are like utilities we must keep the lights on we must heat our homes the biggest banks cannot fail and that s why at least the utility like portion of banking will have to be regulated and regulated more firmly that s an important

community religion employees and the social license to operate the world bank recently noted social license to operate has traditionally referred to the conduct of firms with regard to the impact on local communities and the environment but the definition has expanded in recent years to include issues related to worker and human rights world bank 2013 http go worldbank org fz88vmom90 in this paper we examine a factor that can influence the kind of work conditions that can facilitate or obstruct a firm s attempts to achieve the social license to operate slo specifically we examine the empirical association between a company s employee practices and the religiosity of its local community by investigating their fixed and endogenous effects using a large and extensive u s sample we find a positive association between the employee friendly practices of a firm and the religiosity of the local community after controlling for several firm characteristics in addition after mitigating endogeneity with the dynamic panel system generalized method of moment and after employing several other econometric tests we still find a robust positive association between the religiosity of the local community and employee friendly practices since recent research has shown that the firm s treatment of its stakeholders is a key to achieving an slo and since employees constitute a highly significant stakeholder group we interpret our results as supporting the view that religion is an important influence on the kinds of employee practices that can increase the likelihood that a firm will acquire the slo

the convergence of ethical investment business models and their reliance on the conventional us investment market this study investigates the extent of convergence of the two key types of ethical investment business models islamic finance if investment and socially responsible investment sri and the level

religious beliefs gambling attitudes and financial market outcomes this study investigates whether geographic variation in religion induced gambling norms affects aggregate market outcomes we conjecture that gambling propensity would be stronger in regions with higher concentrations of catholics relative to protestants consistent with our conjecture we show that in regions with higher catholic protestant ratios investors exhibit a stronger propensity to hold lottery type stocks broad based employee stock option plans are more popular the initial day return following an initial public offering is higher and the magnitude of the negative lottery stock premium is larger collectively these results indicate that religion induced gambling attitudes impact investors portfolio choices corporate decisions and stock returns

shareholder value stakeholder management and social issues what s the bottom line we test the relationship between shareholder value stakeholder management and social issue participation building better relations with primary stakeholders like employees customers suppliers and communities could lead to increased shareholder wealth by helping firms develop intangible valuable assets which can be sources of competitive advantage on the other hand using corporate resources for social issues not related to primary stakeholders may not create value for shareholders we test these propositions with data from s p 500 firms and find evidence that stakeholder management leads to improved shareholder value while social issue participation is negatively associated with shareholder value copyright 2001 john wiley sons ltd

an investigation of real versus perceived csp in s p 500 firms firms are spending billions annually in the name of corporate social responsibility csr whilst markets are increasingly willing to reward good and responsible firms they lack the instruments to measure corporate social performance csp to convince investors and other stakeholders firms invest heavily in building a reputation for good corporate behaviour this article argues that reputations for csp are often unrepresentative of true csp and investigates how differences in perceived and actual as measured by the fortune and kld databases respectively can partly be explained by firm characteristics amongst other things it finds that overrated firms are more likely to be relatively big profitable operating in non polluting but competitive industries and with no history of wrong doings to their primary stakeholders they will also typically spend a lot of effort satisfying the claims of their secondary stakeholders above all the results emphasise the need for researchers to recognise that the databases measure different phenomenon and are not interchangeable

religion liberty and economic development an empirical investigation the empirical investigations conducted for this paper show that one can not accept the null hypothesis that religion and liberty are not related to development judeo christianity in particular appears to an important determinant of economic development this is explained in part by its fostering of the private ownership of property nations with the judeo christian values are more likely to have political democracies that are conductive to economic development capitalist economies with judeo christian democracy are more likely to have higher levels of economic development

a learning curve of the market chasing alpha of socially responsible firms abstract this paper explores stock market reactions to corporate social performance we construct a value weighted portfolio based on the list of 100 best csr companies in the world published on the forbes website by reputation institute this portfolio yields statistically significant annual abnormal returns of 1 81 and 1 26 by controlling for carhart four factors and fama french five factors respectively 2 41 and 1 84 respectively for an equal weighted portfolio moreover such abnormal returns decrease as time passes especially after the inaugural publication of the csr lists in 2013 furthermore we find that companies with better social performance are more likely to have positive earnings surprises and that their returns are more sensitive to earnings surprises the results have three implications firstly csr reputation contributes positively to a firm s short term superior equity performance secondly the csr lists facilitate market correction of mispricing intangibles such as csr reputation abnormal returns decrease as the market gradually learns about the value of firms social performance lastly the paper contributes to the socially responsible investing sri screens and provides guidance for investors who would like to do well financially by doing good socially

does firm size comfound the relationship between corporate social performance and firm financial performance there has been some theoretical and empirical debate that the positive relationship between corporate social performance csp and firm financial performance ffp is spurious and in fact caused by a third factor namely large firm size this study examines this question by integrating three meta analyses of more than two decades of research on 1 csp and ffp 2 firm size and csp and 3 firm size and ffp into one path analytic model the present study does not confirm size as a third factor which would confound the relationship between csp and ffp that is even if firm size is controlled for across studies comprising on average over 15 000 observations csp and ffp remain positively correlated showing a true score corrected path coefficient p of 0 37

an empirical analysis of adoption i introduction adoption is as old as recorded history it was practiced by the ancient egyptians greeks and romans technically adoption is a legal procedure by which a couple or less commonly an individual takes someone else s child into their family and raises it as their own the child may be unrelated to either adoptive parent but is often the child of one member of the couple or related in some other way to the adoptive parents adoption severs all legal ties between the birth parents and the child and replaces them by a legal relationship between the child and the adoptive parents in most cases of adoption the birth parents voluntarily surrender their parental rights so that an adoption can take place it seems highly likely that the u s supreme court will allow further restrictions on the availability of abortion as a consequence considerable attention is certain to be focused on the adoption option and its social implications prior to 1970 fertility behavior was little studied by economists partly because it was thought that the determinants were largely noneconomic during the past two decades however economists using a choice theoretic framework have examined a variety of fertility issues such as marriage becker 1974 procreation and children detray 1973 birth control willis 1973 and abortion leibowitz eisen and chow 1986 surprisingly no economic research exists on the issue of adoption despite the fact that it represents a natural extension of the traditional theory of consumer choice most adoption research focuses on sociological issues such as infertility or adoption procedures this paper empirically estimates the supply of adoptions using the decision making economic framework of completed fertility developed by becker 1960 and extended by michael 1973 i believe their model s determinants of desired fertility and family size will also be significant in explaining a household s decision to give up a child for adoption section ii outlines the adoption model and relates it to the economic theory of desired fertility and family size the third and fourth sections discuss the empirical estimates of the adoption model the fifth section examines the impact of various state regulations on the adoption decision and the last section discusses public and social implications of the empirical results ii the adoption model michael argues that households decisions concerning desired family size and the timing of childbearing can be explained in terms of a household production function michael s model is based on a comparison of the benefits and costs from an additional child over time his theory of completed fertility purports to be over a household s full reproductive age span but it is in actuality a period by period analysis households are myopic in that although they consider the future costs and benefits of a child an independent decision is made in each period regarding whether to have a child a household s optimal family size may be for example two children but if when the first child is conceived the household perceives the timing of the birth as undesirable then at that point in time the net benefit from the additional child is negative the consequence is that the child is unwanted and the household will take steps to reduce the discrepancy between the desired and actual stock of children one possible solution is an adoption once a child is born a household has two choices keep the child or put it up for adoption michael s framework implies that the likelihood that a household will place a child for adoption is positively related to the negative discrepancy between the household s desired and actual stock of children at that time the factors affecting a household s desired family size income time values relative productivities and revealed tastes are reflected in the discrepancy between the desired and actual stock of children

market timing and mutual fund performance an empirical investigation the evaluation of investment performance is of importance for allocating investment funds efficiently and setting appropriate management fees because actively managed mutual funds are an important form of investment in the united states a valid question is whether the active management has achieved a sufficient increase in returns to offset the associated costs of information and transactions as well as the management fees charged as a corollary the ability to earn superior returns based on superior forecasting ability would be a violation of the efficient markets hypothesis and would have far reaching implications for the theory of finance 2 henriksson and merton 1981 present statistical techniques for testing forecasting ability with a particular emphasis on the market timing ability of investment managers the tests are derived from the basic model of market timing developed by merton 1981 where the forecaster predicts when stocks will outperform riskless securities and when riskless securities will outperform stocks but does not predict the magnitude of the relative returns the evaluation of the performance of investment managers is a topic of considerable interest to practitioners and academics alike using both the parametric and nonparametric tests for the evaluation of forecasting ability presented by henriksson and merton the market timing ability of 116 open end mutual funds is evaluated for the period 1968 80 the empirical results do not support the hypothesis that mutual fund managers are able to follow an investment strategy that successfully times the return on the market portfolio

corporate social performance and innovation with high social benefits a quantitative analysis this article analyses the link between innovation with high social benefits and corporate social performance csp and the role that family firms play in this this theme is particularly relevant given the large number of firms that are family owned also the implicit potential of innovation to reconcile corporate sustainability aspects with profitability justifies an extended analysis of this link governments often support socially beneficial innovation with various policy instruments with the intention of increasing international competitiveness and simultaneously supporting sustainable development in parallel firms pursue corporate social responsibility csr and environmental management activities partly in the hope that this will foster such innovation in their organisation alongside their main aim of improving csp hence the main research question of this article is about the association of csp with innovation with high social benefits and the determinants of the potential moderation of this association based on panel data the article analyses the link between csp and innovation and the effect of being a family firm using panel estimation techniques the results point to a moderating role of family firms on the link between innovation with high social benefits and csp the article concludes by assessing the policy implications of this insight

risk rationality and religious portfolios i introduction this paper builds on two assumptions the first self evident the second more controversial together they yield a provocative theory of religious behavior and organization the first assumption is that religion involves a great deal of risk those who engage in religious acts cannot know that their efforts will have the desired effects religious acts thus have the character of risky investments exacting resource costs in return for uncertain rewards the second assumption is that people choose their religious behavior rationally weighing the costs and benefits of religious behavior and seeking to limit the risk associated with religious choices churches and other religious firms employ a variety of institutional arrangements that mitigate religious risk most arrangements follow one of two major risk management strategies which in turn give rise to two different styles of religion one centers on collective production the other on private production and diversified consumption collective religion is congregationally oriented and tends to employ exclusivity and costly prohibitions to limit free riding and maintain high levels of commitment private religion is less susceptible to free rider problems but also less capable of generating commitment private religion tends to center on client practitioner relationships or fee for service transactions and consumers tend not to form exclusive attachments to a single religious firm outright payments for goods and services overshadow costly demands for an austere deviant or sacrificial life style a large body of descriptive historic and anecdotal evidence confirms these predictions and illustrates their range of application the concluding sections of the paper apply the proposed theory to a series of contrasts asian versus western religion mainstream churches versus exclusive sects new age versus standard american religion and greco roman paganism versus judeo christian monotheism ii religious commodities and the problem of risk economic models of religious behavior typically begin by assuming that individuals allocate their time and money so as to maximize their utility from religious commodities r and all other secular commodities s the production of religious commodities depends on personal inputs of time and money but may also depend on past experience religious human capital styles of behavior such as diet dress and sexual practices and the time and money inputs of others such as fellow church members see azzi and ehrenberg 1975 sullivan 1985 and iannaccone 1992 for formal analyses and empirical tests with the exception of durkin and greeley 1991 and montgomery 1992 previous models take belief as given thereby sidestepping the issue of risk but religious commodities do involve risk sermons and scriptures do emphasize the need for faith and people do wrestle with and often yield to doubt insights from secular markets and the economics of uncertainty explain a broad range of behaviors and institutions that arise in response to religious risk in particular they highlight two different risk reducing strategies one of which centers on exclusivity and collective production the other centers on diversification and private production managing risk through collective action religious congregations the would be believer faces a situation not unlike the would be used car buyer used cars are classic experience goods nelson 1970 since potential buyers are hard pressed to determine car quality in advance of purchase sellers thus have an incentive to overstate the value of their merchandise and to disguise its true nature used car buyers in turn are aware of the sellers incentive to misrepresent their products and so will attempt to increase their stock of information and or reduce their risk in many ways they may demand guarantees seek information from third parties investigate the seller s reputation and so forth

endogeneity and the dynamics of internal corporate governance abstract we use a well developed dynamic panel generalized method of moments gmm estimator to alleviate endogeneity concerns in two aspects of corporate governance research the effect of board structure on firm performance and the determinants of board structure the estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity we re examine the relation between board structure and performance using the gmm estimator in a panel of 6 000 firms over a period from 1991 to 2003 and find no causal relation between board structure and current firm performance we illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased we discuss where it may be appropriate to consider the dynamic panel gmm estimator in corporate governance research as well as caveats to its use

market timing recent development and a new test abstract henriksson merton s market timing test suffers nontrivial size distortion when the event forecast is autocorrelated a new test is suggested to detect the dependence of two autocorrelated binary time series it complements the existing tests due to better test power

testing for market timing ability abstract in this paper we examine the henriksson merton test of market timing and its potential usefulness in evaluating investment advice the paper proposes a natural extension of the test that is valid under more general assumptions about the distribution of asset returns we show that the henriksson merton test and its more general counterpart are special cases of standard tests of market rationality and efficiency both tests are applied to a group of foreign exchange advisory services

corporate social and financial performance an investigation in the u k supermarket industry the comparison of corporate social performance with corporate financial performance has been a popular field of study over the past 25 years the results while broadly conclusive of a positive relationship are not entirely consistent in addition most of the previous studies have concentrated on large scale cross industry studies and often with a single variable for corporate social performance in order to produce statistically significant results this weakens the richness of understanding that might be obtained from a single industry study with multiple social variables which would also allow investigation of inter relationships between individual and sub sets of social performance measures and between individual and sub sets of social performance and financial performance measures there have also been criticisms that the results lack a rigorous theoretical basis and the paper demonstrates clearly how stakeholder theory must form the basis for this area of research following a review of the literature this paper presents the initial findings from a study of the u k supermarket industry which suggest that contemporaneous social and financial performance are negatively related while prior period financial performance is positively related with subsequent social performance positive relationships between both age and size of the company with social performance are also found

which way the natural gas price an attempt to predict the direction of natural gas spot price movements using trader positions abstract this research provides a method of predicting direction of spot price movements in the natural gas market for the month succeeding from market participants positions in the futures market cumby and modest cumby r e modest d m 1987 testing for market timing ability a framework for forecast evaluation journal of financial economics 19 169 189 provide the backdrop for analyzing the futures market positions of large hedgers and speculators to arrive at conclusions of market price movements in the spot market this methodology is suggested as a means for municipalities entering the natural gas market to improve upon their ordering of quantities of gas for the ensuing months in order to take advantage of possibly foreseeable price trends

do corporate global environmental standards create or destroy market value arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises mnes investing in emerging and developing markets analyzing the global environmental standards of a sample of u s based mnes in relation to their stock market performance we find that firms adopting a single stringent global environmental standard have much higher market values as measured by tobin sq than firms defaulting to less stringent or poorly enforced host country standards thus developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality and perhaps less competitive firms our results also suggest that externalities are incorporated to a significant extent in firm valuation we discuss plausible reasons for this observation

the costs of wrongful discharge laws we estimate the effects on employment and wages of wrongful discharge protections adopted by u s state courts during the last three decades we find robust evidence that one wrongful discharge doctrine the implied contract exception reduced state employment rates by 0 8 to 1 7 the initial impact is largest for female and less educated workers those who change jobs frequently while the longer term effect is greater for older and more educated workers those most likely to litigate by contrast we find no robust employment or wage effects of two other widely recognized wrongful discharge laws the public policy and good faith exceptions i introduction w hat is the price of protection this paper estimates the social costs in possibly lower employment and wages of common law protections designed to protect american workers from wrongful discharge economic the ory suggests that employment protection is a double edged sword it provides employment security to incumbent work ers but makes employers reluctant to hire leading to a less flexible labor market with potentially lower employment and wages it is frequently argued that the stagnant employment performance of many european economies during the 1980s and 1990s eurosclerosis can be attributed in part to the significant employment protection given european workers see lazear 1990 and blanchard and wolfers 1999 krueger and pischke 1998 provide a contrasting view among the obstacles to testing this hypothesis is the difficulty of making reliable inferences using cross country comparisons in this paper we study the effects of employment protec tion in the united states numerous scholars have examined the effects of american federal employment laws on em ployment and unemployment acemoglu and angrist 2001 deleire 2000 and jolls and prescott 2004 present evidence that the americans with disabilities act ada decreased employment of disabled persons oyer and schaefer 2000 2002 conclude that the federal civil rights act of 1991 increased the frequency of mass layoffs and raised the returns to experience for workers who have a downward sloping age litigation profile hahn todd and van der klaauw 2001 also evaluate the costs of federal antidiscrimination laws a major hurdle for each of these studies is that these federal statutes apply all at once to the entire country this makes it difficult to separate the effects of the statute from all other changes occurring simulta neously cf donohue 1998 donohue and heckman

what good does doing good do the effect of bond rating analysts corporate bias on investor reactions to changes in social responsibility in this study we explore how investors reconcile information on firms social responsibility with analysts assessments of future firm risk in the pricing of long term bonds we ask whether investors pay attention to small strides toward and or small slips away from socially responsible behavior arguing that analysts corporate bias toward gains and against losses influences investor reactions to corporate social responsibility we hypothesize that analysts notice and reward improvements in social responsibility yet excuse lapses we find support for this hypothesis using a unique dataset of long term bonds that combines lagged measures of firm level financial and social performance with bond specific data pertaining to risk of default and pricing the empirically robust asymmetry in investor responses to small but often cumulative increases versus decreases in corporate social responsibility reveals an under examined root cause of longer term larger scale distortions in financial market returns regarding corporate social performance our findings elaborate earlier behavioral research on how corporate bias influences analysts short term assessments of economic risk by theorizing why this corporate bias may influence long term assessments of social risk our work also motivates more critical scrutiny of the role analysts play in revising the future risk of today s social action versus inaction

doing well while doing bad csr in controversial industry sectors in this article we examine the empirical association between firm value and csr engagement for firms in sinful industries such as tobacco gambling and alcohol as well as industries involved with emerging environmental social or ethical issues i e weapon oil cement and biotech we develop and test three hypotheses the window dressing hypothesis the value enhancement hypothesis and the value irrelevance hypothesis using an extensive us sample from 1995 to 2009 we find that csr engagement of firms in controversial industries positively affects firm value after controlling for various firm characteristics to address the potential endogeneity problem we further estimate a system of equations and change regression and continue to find a positive relation between csr engagement and firm value our findings support the value enhancement hypothesis and are consistent with the premise that the top management of us firms in controversial industries in general considers social responsibility important even though their products are harmful to human being society or environment

attraction or distraction corporate social responsibility in macao s gambling industry this paper attempts to investigate how and why organisations in macao s gambling industry engage in corporate social responsibility csr it is based on an in depth investigation of macao s gambling industry with 49 semi structured interviews conducted in 2011 we found that firms within the industry were emphasising pragmatic legitimacy based on both economic and non economic contributions in order to project positive images of the industry while glossing over two domains of adverse externalities problem gambling among visitors and the pollution and despoliation of the environment by engaging symbolically rather than substantively in csr the gambling firms were diverting attention away from issues of moral legitimacy in order to be allowed to continue to pursue business as usual as a means of obtaining substantial financial returns in a social cultural and socio political context that was exerting relatively little public pressure to improve corporate social and environmental performance we conjecture that the gambling firms were feeding on borrowed time

does csr reduce firm risk evidence from controversial industry sectors in this paper we examine the relation between corporate social responsibility csr and firm risk in controversial industry sectors we develop and test two competing hypotheses of risk reduction and window dressing employing an extensive u s sample during the 1991 2010 period from controversial industry firms such as alcohol tobacco gambling and others we find that csr engagement inversely affects firm risk after controlling for various firm characteristics to deal with endogeneity issue we adopt a system equation approach and difference regressions and continue to find that csr engagement of firms in controversial industry sectors negatively affects firm risk to examine the premise that firm risk is more of an issue for controversial firms we further examine the difference between non controversial and controversial firm samples and find that the effect of risk reduction through csr engagement is more economically and statistically significant in controversial industry firms than in non controversial industry firms these findings support the risk reduction hypothesis but not the window dressing hypothesis and the notion that the top management of u s firms in controversial industries is in general risk averse and that their csr engagement helps their risk management efforts

beyond portfolio theory the next frontier logically investment theory s next frontier is to put into practice the rich set of tools that academia has bestowed on the investment community starting with harry markowitz s seminal article on portfolio selection in 1952 or is it in fact the next frontier lies beyond simply engineering the implementation of new investment decision tools the time has come to integrate the powerful insights offered by information theory and principal agent theory into a holistic comprehensive theory of investing only such an expanded theory offers any material hope of improving the economic prospects of the millions of clients beneficiaries of today s mutual funds pension funds endowments and foundations

why we need a pension revolution a broad consensus exists that workplace pension arrangements around the world are sick and in need of strong medicine rather than resurrect the traditional defined benefit db plan or broaden defined contribution dc plan coverage this article argues that we move from an either or to an and and mindset to improve global workplace pension coverage adequacy and certainty pension arrangements can combine the best of db and dc plans and minimize the impact of their less attractive features however we must also redesign the institutions through which workplace pensions are delivered the ideal pension delivery institution is expert has scale and acts solely in the best interests of plan participants

labor friendly corporate practices is what is good for employees good for shareholders as corporate managers interact with non shareholder stakeholders potential tradeoffs emerge and questions arise as to how these interactions impact shareholder value we argue that this shareholder stakeholder debate is an important issue within the overall corporate governance and corporate policy domain and examine one such stakeholder group employees by studying labor friendly corporate practices we find that announcements of labor friendly policies are associated with positive abnormal stock returns labor friendly firms also outperform otherwise similar firms both in terms of long run stock market returns and operating results in addition we find that the probability and benefits of labor friendliness increase with the demand for highly skilled labor our analysis of excess executive compensation suggests that top management derives no pecuniary benefits from labor friendly practices we interpret our results as consistent with a genuine concern for employees translating into higher productivity and profitability which in turn facilitate value creation it appears that the benefits of labor friendly practices significantly outweigh the costs and that what is good for employees is good for shareholders

a rose by any other name are family firms named after their founding families rewarded more for their new product introductions the authors explore the relation between the way different family firms are named and the shareholder value impact of these firms new product introductions using an event study of 1 294 product introduction announcements of 107 publicly listed u s family firms the authors find that the presence of the founding family s name as part of a family firm s name acts as a valuable firm resource increasing the abnormal stock returns surrounding the firm s new product introductions superior returns to family named firms new product introductions are partially mediated by these firms history of ethical product related behavior family named firms particularly those with corporate branding and those wherein a founding family member holds the ceo or chairman position are more likely to exhibit a history of avoiding such product related controversies as product safety issues and deceptive advertising the authors highlight the managerial and theoretical contributions of this research

pitfalls in market timing test abstract henriksson and merton s market timing test suffers nontrivial size distortion when the observations are serially dependent sequences potential danger of finding spurious timing ability can be avoided by implementing a markov regression that includes the lagged dependent variables as additional explanatory variables

the construct validity of the kinder lydenberg domini social performance ratings data carroll 1991 encouraged researchers in social issues management sim to continue to measure corporate social performance csp from a variety of different perspectives utilizing a variety of different measures in addition wolfe and aupperle 1991 and others have asserted that there is no single best way to measure csp and that multiple measures and perspectives help develop the field however pfeffer 1993 suggest that a lack of consistent measurement has constrained organization studies and by implication the field of social issues management in its development as a field it may be in the best interest of social issues management researchers to try to development a common body of measures and data recently kinder lydenberg and domini co kld a social choice investment advisory firm has made available their social performance database the kld data have potential to become a widely accepted set of csp measures the purpose of this paper is to present a construct validity study comparing the kld data to other measures of csp

does religion matter in corporate decision making in america abstract we examine how corporate culture influences firm behavior prior research suggests a link between individual religiosity and risk aversion we find that this relationship also influences organizational behavior firms located in counties with higher levels of religiosity display lower degrees of risk exposure as measured by variances in equity returns or returns on assets they exhibit a lower investment rate and less growth but generate a more positive market reaction when they announce new investments finally chief executive officers are more likely to join a firm with a similar religious environment as in their previous firm when they switch employers

the impact of corporate social performance on a firm s multinationality using panel data of 4 244 company years we examine whether and how corporate social performance csp affects a firm s capacity to achieve profitable sales in foreign markets based on our extension of instrumental stakeholder theory into the international arena we hypothesized a u shaped relationship between csp and multinationality results supported our contention that multinational enterprises mnes need to be substantially committed to social performance objectives if they are to recoup the cost of their csp investments and improve their capacity to compete in foreign markets mnes engaged in intermediate levels of csp achieve lower levels of multinationality than firms operating at either anchor of the social performance continuum in addition this study demonstrates that csp moderates a well established relationship in international business literature the relationship between r d investment and a firm s multinationality implications for research and practice are discussed

employee treatment and contracting with bank lenders an instrumental approach for stakeholder management adopting an instrumental approach for stakeholder management we focus on two primary stakeholder groups employees and creditors to investigate the relationship between employee treatment and loan contracts with banks we find strong evidence that fair employee treatment reduces loan price and limits the use of financial covenants in addition we document that relationship bank lenders price both the levels and changes in the quality of employee treatment whereas first time bank lenders only care about the levels of fair employee treatment taking a contingency perspective we find that industry competition and firm asset intangibility moderate the relationship between good human resource management and bank loan costs the cost reduction effect of fair employee treatment is stronger for firms operating in a more competitive industry and having higher levels of intangible assets

introduction to the economics of religion after a very long hiatus economists have begun again to study the relationship between economics and religion this article seeks to summarize and evaluate the principal themes and empirical findings that have appeared in some 200 recent papers on the economics of religion although some of the research concerns the economic consequences of religiosity most applies standard economic theory to the study of individual religious activity the characteristics of religious groups and the impact of regulation and competition on religious markets

simultaneous determination of church contributions and church attendance in a standard model of household allocation of time and income church attendance and church contributions are determined simultaneously there are life cycle aspects to both attendance and contributions as azzi and ehrenberg 1975 and ehrenberg 1977 have argued and contributions behavior is affected by tax treatment and by a potential free rider problem as well this paper motivates an econometric specification which recognizes these features and estimates the parameters with a data set of over 2000 protestant church members

neither a borrower nor a lender be an economic analysis of interest restrictions and usury laws interest rate restrictions are pervasive and important regulations this article suggests that these restrictions served in part as a primitive means of social insurance lowering the rate of interest effectively transfers income to states of the world where individuals have a high marginal utility of income and are borrowers from states of the world where individuals have a low marginal utility of income and are lenders the model predicts that interest rate restrictions will be tighter when income inequality is high and impermanent and when growth rates are low furthermore loan supply must be somewhat inelastic data from u s states support a connection between inequality income shocks and tighter usury laws usury laws were also stricter in older more stable communities the history of usury laws suggests that this social insurance mechanism is one reason usury laws exist and persist but this history also suggests that usury laws have played many roles across time and that no one theory can po

workforce diversity and religiosity workforce diversity has received increasing amounts of attention from academics and practitioners alike in this article we examine the empirical association between a firm s workforce diversity hereafter diversity and the degree of religiosity of the firm s management by investigating their unidirectional and endogenous effects employing a large and extensive u s sample of firms from the years 1991 2010 we find a positive association between a measure of the firm s commitment to diversity and the religiosity of the firm s management after controlling for various firm characteristics in addition after controlling for endogeneity with the dynamic panel generalized method of moment we still find a positive association between the firm s diversity and management s religiosity we interpret these results as supportive of the religious motivation explanation that views the firm as a human community and considers religion as a factor that influences managers to more positively embrace diversity our results however provide no support for the resource constraint hypothesis that views the firm as a nexus of contracts and sees managers as aiming to maximize shareholder returns under resource constraints that force them to invest only in projects that have a positive net present value npv and reject diversity initiatives since these do not have a positive npv

corporate social and financial performance an extended stakeholder theory and empirical test with accounting measures although agreement on the positive sign of the relationship between corporate social and financial performance is observed in the literature the mechanisms that constitute this relationship are not yet well known we address this issue by extending management s stakeholder theory by adding insights from psychology s prospect decision theory and sociology s resource dependence theory empirically we analyze an extensive panel dataset including information on disaggregated measures of social performance for the s p 500 in the 1997 2002 period in so doing we enrich the extant literature by focusing on stakeholder heterogeneity perceptional framing and disaggregated measures of corporate social performance

directional analysis of consumers forecasts of inflation in a small open economy evidence from south korea abstractwe evaluate the directional accuracy of consumers forecasts of inflation in predicting the movement of the actual cpi in a small open economy in order to do so we use a method developed by pesaran and timmermann 2009 based on south korean data by illustrating an application of the new market timing test we show that consumers expectations of inflation are not a useful predictor of the cpi in south korea our findings suggest that the directional accuracy of consumers 1 year ahead forecasts of inflation is not affected by the inflation targeting of the bank of korea our findings also suggest that consumers 1 year ahead forecasts of inflation are scattered away from the bank of korea s inflation target

the price response to s p 500 index additions and deletions evidence of asymmetry and a new explanation we study the price effects of changes to the s p 500 index and document an asymmetric price response there is a permanent increase in the price of added firms but no permanent decline for deleted firms these results are at odds with extant explanations of the effects of index changes that imply a symmetric price response to additions and deletions a possible explanation for asymmetric price effects arises from the changes in investor awareness results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of s p 500 index additions and deletions the long held assumption that stocks have perfect substitutes and the perfect elasticity of demand that follows from it is central to modern finance theory if securities have almost perfectly elastic demand then any supply or demand shocks that are devoid of information should have no effect on the prevailing price early empirical research on whether price changes occur in the absence of new information focused on block trades equity issues and stock splits but was unable to exclude information effects around these events since there is no obvious reason to believe ex ante that index changes contain new information they constitute a natural framework for testing whether stocks have almost perfectly elastic or horizontal demand curves a stock s excess return around such changes could be consistent with a downward sloping demand curve with the advent of indexed mutual funds in 1976 and the public announcement of s p index changes in the same year there is much evidence that such announcements are accompanied by an increase in price for firms added to the index if stocks have a short term downward sloping demand curve the price should be momentarily affected by a demand shock due to indexing but that effect

environmental corporate social responsibility and financial performance disentangling direct and indirect effects abstract this paper assesses the impact of environmental corporate social responsibility ecsr on corporate financial performance cfp measured by roa and tobin s q we show that the relationship between firms return on assets roa and ecsr strengths and concerns is negative and statistically significant we also show that firms tobin q and ecsr strengths and concerns are negatively correlated in a statistically significant way however accounting for the interaction between firms environmental efforts and r d yields a different perspective while the direct impact of ecsr on cfp is still negative the interaction of ecsr and r d has a positive and significant impact on it ecsr strengths and concerns harm cfp since they are perceived as a potential cost however this csr activity fosters r d efforts of firms which generates additional value indirect effect

understanding community benefit payments from renewable energy development abstract it is increasingly common for renewable energy projects to make financial or in kind payments to local communities these arrangements are variously described as benefits payments or compensation schemes similar approaches are now being recommended for other forms of development with potential to engender opposition from local communities e g nuclear power and fracking while such payments are common the level of payment the institutional frameworks involved and the nature of discourse varies greatly existing literature has sought to record rather than explain the diversity of arrangements to a large extent this diversity is rooted in the power dynamic between developer and community three uk case studies are used to highlight the diversity of arrangements meanings and power balances within benefits arrangements finally a typology is developed to illustrate the spectrum of potential arrangements this typology gives insight into why various arrangements emerge in response to their specific contexts

are government and imf forecasts useful an application of a new market timing test abstract we investigate the directional accuracy of gdp and price forecasts by the japanese government and the imf with a new method developed by pesaran and timmermann pesaran m h timmermann a 2009 testing dependence among serially correlated multi category variables journal of the american statistical association 485 325 337 extending the literature to government forecasts our results illustrate an empirical application of the new test our findings provide positive evidence about the usefulness of imf forecasts whereas they cast doubts about government forecasts

a directional evaluation of corporate executives exchange rate forecasts we investigate the directional accuracy of exchange rate forecasts by corporate executives we find that a forecast with a 1 year horizon is valuable for the profitability and unprofitability predictions of manufacturers although previous studies provide considerable evidence that forecasts with horizons of 1 year and longer are not valuable however a forecast is not valuable in predicting an appreciation or depreciation of the exchange rate our findings suggest that corporate executives are more concerned about and focused on the impact of the exchange rate on their profitability rather than the exchange rate itself

qualitative forecast evaluation a comparison of two performance measures agricultural producers and marketers often have access to several sets of forecasts on the same series decision makers must be able to evaluate the relative accuracy of the forecasts the ability to evaluate whether a series will move up or down is important for series related to futures options other asset prices and situations where processes can be modified according to changing economic conditions a measure of qualitative forecast accuracy from naik and leuthold is compared to a probability based measure developed by henriksson and merton the henriksson merton measure is shown to provide additional and more accurate information concerning a model s qualitative forecasting ability

the corporate social performance financial performance link strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management rather than traditional arenas of strategic management using a greatly improved source of data on corporate social performance this paper reports the results of a rigorous study of the empirical linkages between financial and social performance corporate social performance csp is found to be positively associated with prior financial performance supporting the theory that slack resource availability and csp are positively related csp is also found to be positively associated with future financial performance supporting the theory that good management and csp are positively related 1997 by john wiley sons ltd