The Stock Performance of America's 100 Best Corporate Citizens

Abstract

This study considers the stock performance of America's 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey's publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm's presence in the top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with high price-to-book values, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms largely disappears. We also find companies that are newly listed as good citizens and companies in the top 100 but outside the S&P 500 can provide considerable positive abnormal returns to investors.

Keywords: corporate citizenship, Business Ethics 100 Best Corporate Citizens, corporate social responsibility, stock returns, trading rule performance

JEL Classification: G10, G14, M14, M20