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

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.     

Local Economic Performance and Election Outcomes

This paper uses a logit model to test whether voters will alter their support for incumbents in state level elections, specifically gubernatorial and state house and senate elections, when local (i.e., county) economic conditions are observed. The results signify that voters do hold the incumbent party responsible for economic conditions. Furthermore, voters tend to place more emphasis on unemployment levels than on real personal income indicating that incumbent politicians might want to engage in policies that put people to work rather than on policies that raise income. The results also suggest that voters did not hold their state house and senate representative as responsible for local economic conditions as they did the governor.     

Analyst Report Readability

Using an extensive database of 356,463 sell‐side equity analysts' reports from 2002 to 2009, this study is one of the first to analyze the readability of analysts' reports. We first examine the determinants of variations in analyst report readability. Using several proxies for ability, we show that reports are more readable when issued by analysts with higher ability. Second, we test the relation between analysts' report readability and stock trading volume reactions. We find that trading volume reactions increase with the readability of analysts' text, consistent with theoretical models that predict that more precise information (and hence more informative signals) results in investors' initiating trades. These results support the view that the readability of analysts' reports is important to analysts and capital market participants.     

Hedonic pricing and the role of stud fees in the market for thoroughbred yearlings in Australia

Using data from one of Australia's largest thoroughbred auction houses, we investigate the price determinants of thoroughbred yearlings sold at auction. We include novel key variables to construct hedonic pricing models and examine the relative role of stud fees compared to the wide range of attributes in the pricing of yearlings. We find that the price effect of stud fees is influenced by the value buyers place on both the characteristics of sires and the characteristics of sire side siblings. The findings imply that the quality of dams a sire has been matched within the breeding market has consequential effects on yearling prices through the sire's stud fee and progeny.     

Macro effects of interest-sensitive aggregate supply

This paper investigates the implications of the negative effect of the real interest rate on aggregate supply. The micro foundations of this effect are first explained. The effect is then incorporated into a dynamic macro model with inflation and rational expectations. If the wealth effect on consumption is large, an increased interest sensitivity of aggregate supply enhances stability. If the wealth effect is small, increased interest sensitivity of supply is stabilizing up to a point, and destabilizing beyond that. Furthermore, an increased interest sensitivity of aggregate supply enhances the positive effect of the monetary growth rate upon steady-state output, and it enhances the negative effect of government spending upon steady-state output.     

Consumer Purchasing in Foreign Countries: A Perceived Risk Perspective

Increases in tourism and international business mean more non-nationals will be consuming products in foreign countries. No study has yet examined their purchasing behaviour using a perceived risk framework. This article reports the results of an exploratory study of national and non-national consumers who rated loss types and risk relievers for 24 products. In general non-nationals perceived more risk in product purchase and considerably more psychosocial loss than nationals. They also rated all risk relievers as significantly more useful than nationals. For both groups brand loyalty was the most useful risk reliever while celebrity endorsement was the least useful.     

The Application of Activity-based Costing in the United Kingdom's Largest Financial Institutions

Activity-based costing (ABC) has come to prominence in recent years as an attractive alternative to conventional costing systems. Its development has involved many service sector applications and its use throughout the core management accounting areas of decision making, control and performance measurement. This article contains the results of a 1994 survey of the UK's largest financial institutions to ascertain the extent and the nature of the adoption of ABC.     

VOLUNTARY DISCLOSURE OF SEGMENT INFORMATION: FURTHER AUSTRALIAN EVIDENCE

This study provides further empirical evidence on incentives for Australian firms to voluntarily report segment information. Various economic reasons why firms may elect to present segment information have been hypothesised in previous research. Bradbury [1992] and McKinnon and Dalimunthe [1993] found firm size, minority interest and industry membership as significant identifiable characteristics motivating voluntary segmental disclosure. Variables found to be insignificant in Bradbury [1992] which were not examined by McKinnon and Dalimunthe [1993] are tested in this paper. Hypotheses relating to size, financial leverage, assets-in-place, earnings volatility, ownership diffusion, outside equity (minority) interest, overseas association as well as diverse and mining and oil classification hypotheses are empirically examined. Univariate tests and multivariate logit analysis suggest that for a extensive sample of diversified firms, voluntary segment disclosure is significantly related to size, leverage and involvement in mining or oil activities.