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The effects of social ratings on firm value

Author

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  • Alexis Cellier

    (IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

  • Pierre Chollet

    (MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier)

Abstract

This paper examines, in a short-term perspective, the effects of Vigeo social ratings announcements on the firm's shareholder value. From an event study on a large sample of European firms, we show that the announcement of ratings generates a strong positive stock market reaction regardless of whether the rating is good or bad. This finding underlines the relevance of ratings and reveals the value effects of corporate social responsibility (CSR). We also find that the overall rating has no impact on shareholders' wealth. We highlight that specific CSR dimensions drive the value effects. Some are value enhancing and others value destroying. Our study complements the literature on the complex links between socially responsible practices and firm value. It gives arguments to measure properly the benefits and risks associated with non-financial factors, and to integrate them into asset pricing models and allocation processes.

Suggested Citation

  • Alexis Cellier & Pierre Chollet, 2016. "The effects of social ratings on firm value," Post-Print hal-02009558, HAL.
    • Handle: RePEc:hal:journl:hal-02009558
    DOI: 10.1016/j.ribaf.2015.05.001
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    Citations

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    Cited by:

    1. Prasad, Krishna & Kumar, Satish & Devji, Shridev & Lim, Weng Marc & Prabhu, Nandan & Moodbidri, Sudhir, 2022. "Corporate social responsibility and cost of capital: The moderating role of policy intervention," Research in International Business and Finance, Elsevier, vol. 60(C).
    2. Fernando Gómez-Bezares & Wojciech Przychodzen & Justyna Przychodzen, 2016. "Corporate Sustainability and Shareholder Wealth—Evidence from British Companies and Lessons from the Crisis," Sustainability, MDPI, vol. 8(3), pages 1-22, March.
    3. Patrycja Chodnicka-Jaworska, 2021. "ESG as a Measure of Credit Ratings," Risks, MDPI, vol. 9(12), pages 1-26, December.
    4. Atawnah, Nader & Eshraghi, Arman & Baghdadi, Ghasan A. & Bhatti, Ishaq, 2024. "Managerial ability and firm value: A new perspective," Research in International Business and Finance, Elsevier, vol. 67(PB).
    5. Alain Devalle & Simona Fiandrino & Valter Cantino, 2017. "The Linkage between ESG Performance and Credit Ratings: A Firm-Level Perspective Analysis," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(9), pages 1-53, August.
    6. Ioannis Tampakoudis & Evgenia Anagnostopoulou, 2020. "The effect of mergers and acquisitions on environmental, social and governance performance and market value: Evidence from EU acquirers," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 1865-1875, July.
    7. Erragragui, Elias, 2018. "Do creditors price firms’ environmental, social and governance risks?," Research in International Business and Finance, Elsevier, vol. 45(C), pages 197-207.
    8. Petridis, Konstantinos & Tampakoudis, Ioannis & Drogalas, George & Kiosses, Nikolaos, 2022. "A Support Vector Machine model for classification of efficiency: An application to M&A," Research in International Business and Finance, Elsevier, vol. 61(C).

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