Corporate social performance, competitive advantage, earnings persistence and firm value
Gregory, Alan; Whittaker, Julie; Yan, Xiaojuan
Date: 25 January 2016
Article
Journal
Journal of Business Finance and Accounting
Publisher
Wiley
Publisher DOI
Abstract
In this paper, using a generalised valuation framework inspired by Ohlson (1995), we show that corporate social performance (CSP) is value relevant and that, in particular, it appears to be associated with a higher coefficient on earnings. This could be attributable to either a lower cost of equity for these firms, or greater earnings ...
In this paper, using a generalised valuation framework inspired by Ohlson (1995), we show that corporate social performance (CSP) is value relevant and that, in particular, it appears to be associated with a higher coefficient on earnings. This could be attributable to either a lower cost of equity for these firms, or greater earnings persistence. We show that, once industry membership is controlled for, any cost of capital effect is minimal. Regression tests based on realised earnings confirm that the valuation effect is attributable mainly to greater earnings persistence in firms with higher levels of CSP. These outcomes are consistent with higher CSP conferring a competitive advantage on firms.
Finance and Accounting
Faculty of Environment, Science and Economy
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