A systematic literature review on financial stock performance of sustainable investments: Bridging the gap between empirical evidence and recent theoretical models
Economics, Finance, Business & Industry, Environment and Sustainability, Global Development
Disciplines :
Finance
Author, co-author :
Faverjon, Anouck ; Université de Liège - ULiège > HEC Liège Research ; Université de Liège - ULiège > HEC Liège : UER > UER Finance et Droit : Analyse financière et finance d'entr. ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Financial Management for the Future
Hardy, Céleste ; Université de Liège - ULiège > HEC Liège : UER > UER Finance et Droit : Analyse financière et finance d'entr. ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Financial Management for the Future ; Université de Liège - ULiège > HEC Liège Research
Lambert, Marie ; Université de Liège - ULiège > HEC Liège : UER > UER Finance et Droit : Analyse financière et finance d'entr. ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Financial Management for the Future ; Université de Liège - ULiège > HEC Liège Research
Language :
English
Title :
A systematic literature review on financial stock performance of sustainable investments: Bridging the gap between empirical evidence and recent theoretical models
Aktas, N., De Bodt, E., & Cousin, J. G. (2011). Do financial markets care about SRI? Evidence from mergers and acquisitions. Journal of Banking and Finance, 35(7), 1753-1761. https://doi.org/10.1016/j.jbankfin.2010.12.006
Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451-4469. https://doi.org/10.1287/mnsc.2018.3043
Alexandridis, G., Hoepner, A. G., Huang, Z., & Oikonomou, I. (2022). Corporate social responsibility culture and international M&As. British Accounting Review, 54(1), 101035. https://doi.org/10.1016/j.bar.2021.101035
Ardia, D., Bluteau, K., Boudt, K., & Inghelbrecht, K. (2022). Climate change concerns and the performance of green versus brown stocks. Management Science, in press. https://doi.org/10.1287/mnsc.2022.4636
Avramov, D., Cheng, S., Lioui, A., & Tarelli, A. (2021). Sustainable investing with ESG rating uncertainty. Journal of Financial Economics, 145(2), 642-664. https://doi.org/10.1016/j.jfineco.2021.09.009
Bae, K. H., El Ghoul, S., Gong, Z. J., & Guedhami, O. (2021). Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic. Journal of Corporate Finance, 67, 101876. https://doi.org/10.1016/j.jcorpfin.2020.101876
Bansal, R., Wu, D., & Yaron, A. (2022). Socially responsible investing in good and bad times. Review of Financial Studies, 35(4), 2067-2099. https://doi.org/10.1093/rfs/hhab072
Barko, T., Cremers, M., & Renneboog, L. (2022). Shareholder engagement on environmental, social, and governance performance. Journal of Business Ethics, 180(2), 777-812. https://doi.org/10.1007/s10551-021-04850-z
Bebchuk, L. A., Cohen, A., & Wang, C. C. (2013). Learning and the disappearing association between governance and returns. Journal of Financial Economics, 108(2), 323-348. https://doi.org/10.1016/j.jfineco.2012.10.004
Becchetti, L., Ciciretti, R., Hasan, I., & Kobeissi, N. (2012). Corporate social responsibility and shareholder’s value. Journal of Business Research, 65(11), 1628-1635. https://doi.org/10.1016/j.jbusres.2011.10.022
Bénabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77(305), 1-19. https://doi.org/10.1111/j.1468-0335.2009.00843.x
Berg, F., Koelbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315-1344.
Billio, M., Costola, M., Hristova, I., Latino, C., & Pelizzon, L. (2021). Inside the ESG Ratings:(Dis) agreement and performance. Corporate Social Responsibility and Environmental Management, 28(5), 1426-1445. https://doi.org/10.1002/csr.2177
Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate social responsibility and market efficiency: Evidence from ESG and misvaluation measures. Journal of Banking and Finance, 134, 106322. https://doi.org/10.1016/j.jbankfin.2021.106322
Bolton, P., & Kacperczyk, M. T. (2020). Carbon premium around the world. https://doi.org/10.2139/ssrn.3550233
Bose, S., Minnick, K., & Shams, S. (2021). Does carbon risk matter for corporate acquisition decisions? Journal of Corporate Finance, 70, 102058. https://doi.org/10.1016/j.jcorpfin.2021.102058
Boubaker, S., Liu, Z., & Zhan, Y. (2022). Customer relationships, corporate social responsibility, and stock price reaction: Lessons from China during health crisis times. Finance Research Letters, 102699. https://doi.org/10.1016/j.frl.2022.102699
Breuer, W., Müller, T., Rosenbach, D., & Salzmann, A. (2018). Corporate social responsibility, investor protection, and cost of equity: A cross-country comparison. Journal of Banking and Finance, 96, 34-55. https://doi.org/10.1016/j.jbankfin.2018.07.018
Broadstock, D. C., Chan, K., Cheng, L. T., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. https://doi.org/10.1016/j.frl.2020.101716
Brzeszczyński, J., Gajdka, J., & Schabek, T. (2021). How risky are the socially responsible investment (SRI) stocks? Evidence from the Central and Eastern European (CEE) companies. Finance Research Letters, 42, 101939. https://doi.org/10.1016/j.frl.2021.101939
Capelle-Blancard, G., & Petit, A. (2019). Every little helps? ESG news and stock market reaction. Journal of Business Ethics, 157(2), 543-565. https://doi.org/10.1007/s10551-017-3667-3
Cellier, A., & Chollet, P. (2016). The effects of social ratings on firm value. Research in International Business and Finance, 36, 656-683. https://doi.org/10.1016/j.ribaf.2015.05.001
Chan, P. T., & Walter, T. (2014). Investment performance of “environmentally-friendly” firms and their initial public offers and seasoned equity offers. Journal of Banking and Finance, 44, 177-188. https://doi.org/10.1016/j.jbankfin.2014.04.006
Chatterji, A. K., Durand, R., Levine, D. I., & Touboul, S. (2016). Do ratings of firms converge? Implications for managers, investors and strategy researchers. Strategic Management Journal, 37(8), 1597-1614.
Chava, S. (2014). Environmental externalities and cost of capital. Management Science, 60(9), 2223-2247. https://doi.org/10.1287/mnsc.2013.1863
Christensen, D. M. (2016). Corporate accountability reporting and high-profile misconduct. Accounting Review, 91(2), 377-399. https://doi.org/10.2308/accr-51200
Crifo, P., Forget, V. D., & Teyssier, S. (2015). The price of environmental, social and governance practice disclosure: An experiment with professional private equity investors. Journal of Corporate Finance, 30, 168-194. http://doi.org/10.1016/j.jcorpfin.2014.12.006
Deng, X., Kang, J. K., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110(1), 87-109. https://doi.org/10.1016/j.jfineco.2013.04.014
Derwall, J., Koedijk, K., & Ter Horst, J. (2011). A tale of values-driven and profit-seeking social investors. Journal of Banking and Finance, 35(8), 2137-2147. https://doi.org/10.1016/j.jbankfin.2011.01.009
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. Accounting Review, 86(1), 59-100. https://doi.org/10.2308/accr.00000005
Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., & Yang, Y. G. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. Accounting Review, 87(3), 723-759. https://doi.org/10.2308/accr-10218
Díaz, V., Ibrushi, D., & Zhao, J. (2021). Reconsidering systematic factors during the COVID-19 pandemic-The rising importance of ESG. Finance Research Letters, 38, 101870. https://doi.org/10.1016/j.frl.2020.101870
Dimson, E., Karakaş, O., & Li, X. (2015). Active ownership. Review of Financial Studies, 28(12), 3225-3268. https://doi.org/10.1093/rfs/hhv044
Ding, W., Levine, R., Lin, C., & Xie, W. (2021). Corporate immunity to the COVID-19 pandemic. Journal of Financial Economics, 141(2), 802-830. https://doi.org/10.1016/j.jfineco.2021.03.005
Dutordoir, M., Strong, N. C., & Sun, P. (2018). Corporate social responsibility and seasoned equity offerings. Journal of Corporate Finance, 50, 158-179. https://doi.org/10.1016/j.jcorpfin.2018.03.005
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857. https://doi.org/10.1287/mnsc.2014.1984
Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics, 101(3), 621-640. https://doi.org/10.1016/j.jfineco.2011.03.021
El Ghoul, S., Guedhami, O., Kwok, C. C., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking and Finance, 35(9), 2388-2406. https://doi.org/10.1016/j.jbankfin.2011.02.007
Engle, R. F., Giglio, S., Kelly, B., Lee, H., & Stroebel, J. (2020). Hedging climate change news. Review of Financial Studies, 33(3), 1184-1216. https://doi.org/10.1093/rfs/hhz072
Erhemjamts, O., & Huang, K. (2019). Institutional ownership horizon, corporate social responsibility and shareholder value. Journal of Business Research, 105, 61-79. https://doi.org/10.1016/j.jbusres.2019.05.037
Erragragui, E., & Lagoarde-Segot, T. (2016). Solving the SRI puzzle? A note on the mainstreaming of ethical investment. Finance Research Letters, 18, 32-42. https://doi.org/10.1016/j.frl.2016.03.018
Erragraguy, E., & Revelli, C. (2015). Should Islamic investors consider SRI criteria in their investment strategies? Finance Research Letters, 14, 11-19. https://doi.org/10.1016/j.frl.2015.07.003
Feng, Z. Y., Chen, C. R., & Tseng, Y. J. (2018). Do capital markets value corporate social responsibility? Evidence from seasoned equity offerings. Journal of Banking and Finance, 94, 54-74. https://doi.org/10.1016/j.jbankfin.2018.06.015
Flammer, C. (2015). Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), 2549-2568. https://doi.org/10.1287/mnsc.2014.2038
Frazzini, A., & Pedersen, L. H. (2014). Betting against beta. Journal of Financial Economics, 111(1), 1-25. https://doi.org/10.1016/j.jfineco.2013.10.005
Fuenzalida, D., Mongrut, S., Arteaga, J. R., & Erausquin, A. (2013). Good corporate governance: Does it pay in Peru? Journal of Business Research, 66(10), 1759-1770. https://doi.org/10.1016/j.jbusres.2013.01.008
Galema, R., Plantinga, A., & Scholtens, B. (2008). The stocks at stake: Return and risk in socially responsible investment. Journal of Banking and Finance, 32(12), 2646-2654. https://doi.org/10.1016/j.jbankfin.2008.06.002
Gibson Brandon, R., Krueger, P., & Schmidt, P. S. (2021). ESG rating disagreement and stock returns. Financial Analysts Journal, 77(4), 104-127. https://doi.org/10.1080/0015198X.2021.1963186
Gomes, M., & Marsat, S. (2018). Does CSR impact premiums in M&A transactions? Finance Research Letters, 26, 71-80. https://doi.org/10.1016/j.frl.2017.12.005
Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. Quarterly Journal of Economics, 118(1), 107-156. https://doi.org/10.1162/00335530360535162
Green, T. C., Huang, R., Wen, Q., & Zhou, D. (2019). Crowdsourced employer reviews and stock returns. Journal of Financial Economics, 134(1), 236-251. https://doi.org/10.1016/j.jfineco.2019.03.012
Gregory, A., Tharyan, R., & Whittaker, J. (2014). Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124(4), 633-657. https://doi.org/10.1007/s10551-013-1898-5
Haddaway, N. R., & Macura, B. (2018). The role of reporting standards in producing robust literature reviews. Nature Climate Change, 8(6), 444-447. https://doi.org/10.1038/s41558-018-0180-3
Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment on corporate behavior. Journal of Financial and Quantitative Analysis, 36(4), 431-449. https://doi.org/10.2307/2676219
Hmiden, O. B., Rjiba, H., & Saadi, S. (2022). Competition through environmental CSR engagement and cost of equity capital. Finance Research Letters, 102773. https://doi.org/10.1016/j.frl.2022.102773
Hong, H., & Kacperczyk, M. (2009). The price of sin: The effects of social norms on markets. Journal of Financial Economics, 93(1), 15-36. https://doi.org/10.1016/j.jfineco.2008.09.001
Huang, Y., Yang, S., & Zhu, Q. (2021). Brand equity and the Covid-19 stock market crash: Evidence from US listed firms. Finance Research Letters, 43, 101941. https://doi.org/10.1016/j.frl.2021.101941
Humphrey, J. E., Lee, D. D., & Shen, Y. (2012). Does it cost to be sustainable? Journal of Corporate Finance, 18(3), 626-639. https://doi.org/10.1016/j.jcorpfin.2012.03.002
Hussaini, M., Hussain, N., Nguyen, D. K., & Rigoni, U. (2021). Is corporate social responsibility an agency problem? An empirical note from takeovers. Finance Research Letters, 43, 102007. https://doi.org/10.1016/j.frl.2021.102007
Jost, S., Erben, S., Ottenstein, P., & Zülch, H. (2022). Does corporate social responsibility impact mergers & acquisition premia? New international evidence. Finance Research Letters, 46, 102237. https://doi.org/10.1016/j.frl.2021.102237
Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. Accounting Review, 91(6), 1697-1724. https://doi.org/10.2308/accr-51383
Kim, Y., Li, H., & Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking and Finance, 43, 1-13. https://doi.org/10.1016/j.jbankfin.2014.02.013
Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on firm performance. Management Science, 42(8), 1199-1214. https://doi.org/10.1287/mnsc.42.8.1199
Krüger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304-329. https://doi.org/10.1016/j.jfineco.2014.09.008
Lam, S. S., Zhang, W., & Jacob, G. H. (2015). The mispricing of socially ambiguous grey stocks. Finance Research Letters, 13, 81-89. https://doi.org/10.1016/j.frl.2015.02.010
Lee, S., Lee, D., Hong, C., & Park, M. H. (2022). Performance of socially responsible firms during the COVID-19 crisis and trading behavior by investor type: Evidence from the Korean stock market. Finance Research Letters, 45, 102660. https://doi.org/10.1016/j.frl.2021.102660
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. Journal of Finance, 72(4), 1785-1824. https://doi.org/10.1111/jofi.12505
Lööf, H., Sahamkhadam, M., & Stephan, A. (2021). Is corporate social responsibility investing a free lunch? The relationship between ESG, tail risk, and upside potential of stocks before and during the COVID-19 crisis. Finance Research Letters, 102499. https://doi.org/10.1016/j.frl.2021.102499
Luo, H. A., & Balvers, R. J. (2017). Social screens and systematic investor boycott risk. Journal of Financial and Quantitative Analysis, 52(1), 365-399. https://doi.org/10.1017/S0022109016000910
Markowitz, H. M. (1952). portfolio selection. Journal of Finance, 7(1), 77-91.
Masulis, R. W., & Reza, S. W. (2015). Agency problems of corporate philanthropy. Review of Financial Studies, 28(2), 592-636. https://doi.org/10.1093/rfs/hhu082
McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social responsibility and firm financial performance. Academy of Management Journal, 31(4), 854-872. https://doi.org/10.2307/256342
Merton, R. C. (1987). A simple model of capital market equilibrium with incomplete information. Journal of Finance (New York), 42(3), 483-510. https://doi.org/10.1111/j.1540-6261.1987.tb04565.x
Monfort, A., Villagra, N., & Sánchez, J. (2021). Economic impact of corporate foundations: An event analysis approach. Journal of Business Research, 122, 159-170. https://doi.org/10.1016/j.jbusres.2020.08.046
Naffa, H., & Fain, M. (2022). A factor approach to the performance of ESG leaders and laggards. Finance Research Letters, 44, 102073. https://doi.org/10.1016/j.frl.2021.102073
Naughton, J. P., Wang, C., & Yeung, I. (2019). Investor sentiment for corporate social performance. Accounting Review, 94(4), 401-420. https://doi.org/10.2308/accr-52303
Ng, A. C., & Rezaee, Z. (2015). Business sustainability performance and cost of equity capital. Journal of Corporate Finance, 34, 128-149. https://doi.org/10.1016/j.jcorpfin.2015.08.003
Nguyen, P. A., Kecskés, A., & Mansi, S. (2020). Does corporate social responsibility create shareholder value? The importance of long-term investors. Journal of Banking and Finance, 112, 105217. https://doi.org/10.1016/j.jbankfin.2017.09.013
Nofsinger, J. R., Sulaeman, J., & Varma, A. (2019). Institutional investors and corporate social responsibility. Journal of Corporate Finance, 58, 700-725. https://doi.org/10.1016/j.jcorpfin.2019.07.012
Oikonomou, I., Brooks, C., & Pavelin, S. (2012). The impact of corporate social performance on financial risk and utility: A longitudinal analysis. Financial Management, 41(2), 483-515. https://doi.org/10.1111/j.1755-053X.2012.01190.x
Pástor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2015). Scale and skill in active management. Journal of Financial Economics, 116(1), 23-45.
Pastor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571. https://doi.org/10.1016/j.jfineco.2020.12.011
Pastor, Ľ., & Vorsatz, M. B. (2020). Mutual fund performance and flows during the COVID-19 crisis. Review of Asset Pricing Studies, 10(4), 791-833. https://doi.org/10.1093/rapstu/raaa015
Pedersen, L. H., Fitzgibbons, S., & Pomorski, L. (2021). Responsible investing: The ESG-efficient frontier. Journal of Financial Economics, 142(2), 572-597. https://doi.org/10.1016/j.jfineco.2020.11.001
Porter, M. E., & Kramer, M. R. (2011). Creating shared value: Redefining capitalism and the role of the corporation in society. Harvard Business Review, 89(1/2), 62-77.
Porter, M. E., & Van der Linde, C. (1995). Green and competitive: Ending the stalemate. Harvard Business Review, 73(5), 120-134.
Riedl, A., & Smeets, P. (2017). Why do investors hold socially responsible mutual funds? Journal of Finance, 72(6), 2505-2550. https://doi.org/10.1111/jofi.12547
Serafeim, G., & Yoon, A. (2022). Stock price reactions to ESG news: The role of ESG ratings and disagreement. Review of Accounting Studies, 1-31. https://doi.org/10.1007/s11142-022-09675-3
Shackleton, M., Yan, J., & Yao, Y. (2022). What drives a firm’s ES performance? Evidence from stock returns. Journal of Banking and Finance, 136, 106304. https://doi.org/10.1016/j.jbankfin.2021.106304
Shanaev, S., & Ghimire, B. (2022). When ESG meets AAA: The effect of ESG rating changes on stock returns. Finance Research Letters, 46, 102302. https://doi.org/10.1016/j.frl.2021.102302
Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29(6), 569-592. https://doi.org/10.1002/smj.678
Trinks, P. J., & Scholtens, B. (2017). The opportunity cost of negative screening in socially responsible investing. Journal of Business Ethics, 140(2), 193-208. https://doi.org/10.1007/s10551-015-2684-3
Verwijmeren, P., & Derwall, J. (2010). Employee well-being, firm leverage, and bankruptcy risk. Journal of Banking and Finance, 34(5), 956-964. https://doi.org/10.1016/j.jbankfin.2009.10.006
Wong, J. B., & Zhang, Q. (2022). Stock market reactions to adverse ESG disclosure via media channels. British Accounting Review, 54(1), 101045. https://doi.org/10.1016/j.bar.2021.101045
Yoon, A., & Welch, K. (2020). Corporate sustainability and stock returns: Evidence from employee buy-in to senior management.
Zhang, J., Zhang, Y., & Sun, Y. (2022). Restart economy in a resilient way: The value of corporate social responsibility to firms in COVID-19. Finance Research Letters, 102683. https://doi.org/10.1016/j.frl.2022.102683
Zou, P., & Li, G. (2016). How emerging market investors’ value competitors’ customer equity: Brand crisis spillover in China. Journal of Business Research, 69(9), 3765-3771. https://doi.org/10.1016/j.jbusres.2015.12.068