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Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI)

Publication ,  Journal Article
Hawn, O; Chatterji, AK; Mitchell, W
Published in: Strategic Management Journal
April 1, 2018

Research Summary: Research exploring investor reactions to sustainability has substantial empirical limitations, which we address with a large-scale longitudinal financial event study of the first global sustainability index, DJSI World. We examine investor reactions to firms from 27 countries over 17 years that are added, deleted, or continue on the index. We find that once relevant controls and comparisons to observationally equivalent firms beyond the index are included, DJSI events have only limited significance and/or materiality. Nonetheless, investors' valuation of sustainability around the world has evolved over time, involving diminishing reactions to U.S. firms and increasing benefits, particularly of continuation on the index, over time. The study highlights the importance of careful analysis and longitudinal global samples in making inferences about the financial effects of social performance. Managerial Summary: The debate about how investors perceive corporate social responsibility (CSR) predates Milton Friedman's famous statement that the only social responsibility of business is to increase profits. Although extensive research has studied whether sustainability contributes to financial performance, we have yet to understand whether investors believe it pays off. This financial event study of reactions to the addition, continuation, and deletion from DJSI World, the first global sustainability index, shows that investors care little about DJSI announcements. Nonetheless, there is some evidence that global assessments of sustainability are converging and that investors may increasingly be valuing continuation on the DJSI, suggesting that firms may gain at least limited benefits from reliable sustainability activities.

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Published In

Strategic Management Journal

DOI

EISSN

1097-0266

ISSN

0143-2095

Publication Date

April 1, 2018

Volume

39

Issue

4

Start / End Page

949 / 976

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 1505 Marketing
  • 1503 Business and Management
 

Citation

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Hawn, O., Chatterji, A. K., & Mitchell, W. (2018). Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI). Strategic Management Journal, 39(4), 949–976. https://doi.org/10.1002/smj.2752
Hawn, O., A. K. Chatterji, and W. Mitchell. “Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI).” Strategic Management Journal 39, no. 4 (April 1, 2018): 949–76. https://doi.org/10.1002/smj.2752.
Hawn O, Chatterji AK, Mitchell W. Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI). Strategic Management Journal. 2018 Apr 1;39(4):949–76.
Hawn, O., et al. “Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI).” Strategic Management Journal, vol. 39, no. 4, Apr. 2018, pp. 949–76. Scopus, doi:10.1002/smj.2752.
Hawn O, Chatterji AK, Mitchell W. Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI). Strategic Management Journal. 2018 Apr 1;39(4):949–976.
Journal cover image

Published In

Strategic Management Journal

DOI

EISSN

1097-0266

ISSN

0143-2095

Publication Date

April 1, 2018

Volume

39

Issue

4

Start / End Page

949 / 976

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 1505 Marketing
  • 1503 Business and Management