Did the Creation of ISE Created Value to Companies?

Abstract

The present research conducted an event study to evaluate the effect of Corporate Social Responsibility (CSR) on share price, following approach work of Curran and Moran's (2007). The share price of a company was used as a measure of the companies' financial performance. The announcement of the constituents of the indice de Sustentabilidade Empresarial (ISE) was defined as the proxy for CSR. None of the abnormal returns and Cumulative Abnormal Returns were statistically significant from zero, although the mean abnormal return for day 0 was positive. This work did not find evidence of positive abnormal returns following the announcements of companies being included in ISE. On the other hand, there was also no evidence of negative abnormal returns. The lack of significant results have been found in previous distinct work for international indexes and also for the Brazilian index and it does not necessarily mean absence of relation between good social practices and creation of value. There are some possible explanations for the lack of relation. Among the possible explanations, the low power of t-test is a possibility that was found in this paper, but that has not been acknowledged in other works.

Keywords: Corporate Social Responsability

JEL Classification: G34