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The value of Saints and the price of Sin

Author

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  • Koh, SzeKee
  • Durand, Robert B.
  • Limkriangkrai, Manapon

Abstract

Using firms in the MSCI KLD 400 as exemplars of virtuous firms (the “Saints”), and firms in the “Triumvirate of Sin” – alcohol, tobacco and gaming – we utilize a modification of the Feltham and Ohlson (1995) valuation model and quantile regressions to estimate “Saint premiums” and “Sinner discounts”. For firms followed by sell-side analysts, the Saint premium is, on average, $5.77 (a 19.2% premium over the share price) and the Sinner discount is, on average, $3.91 (a discount of 32.1% of the share price). The evidence supports the notion that CSR creates shareholder value. Practices contrary to social norms destroy value.

Suggested Citation

  • Koh, SzeKee & Durand, Robert B. & Limkriangkrai, Manapon, 2015. "The value of Saints and the price of Sin," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 56-72.
    • Handle: RePEc:eee:pacfin:v:35:y:2015:i:pa:p:56-72
    DOI: 10.1016/j.pacfin.2014.10.003
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    Cited by:

    1. Ali I. El Saleh & Doureige J. Jurdi, 2021. "Stock performance under alternative Shariah screening methods: Evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4339-4388, September.
    2. Gao, Ya & Xiong, Xiong & Feng, Xu, 2020. "Responsible investment in the Chinese stock market," Research in International Business and Finance, Elsevier, vol. 52(C).
    3. Manapon Limkriangkrai & SzeKee Koh & Robert B. Durand, 2017. "Environmental, Social, and Governance (ESG) Profiles, Stock Returns, and Financial Policy: Australian Evidence," International Review of Finance, International Review of Finance Ltd., vol. 17(3), pages 461-471, September.
    4. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.

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    More about this item

    Keywords

    Corporate Social Responsibility; Environmental; Social and Governance; Value relevance; Feltham–Ohlson model;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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