Linkage between Company Scores and Stock Returns
Previous studies on company scores conducted at firm-level, generally concluded that there exists a positive relation between company scores and stock returns. Motivated by these studies, this study examines the relationship between company scores (Corporate Governance Score, Economic Score, Environmental Score, and Social Score) and stock returns, both at portfolio- level analysis and firm-level cross-sectional regressions. In portfolio-level analysis, stocks are sorted based on each company scores and quintile portfolio are formed with different levels of company scores. Then, existence and significance of raw returns and risk-adjusted returns difference between portfolios with the extreme company scores (portfolio 10 and portfolio 1) is tested. In addition, firm-level cross-sectional regression is performed to examine the significance of company scores effects with control variables. While portfolio-level analysis results indicate that there is no significant relation between company scores and stock returns; firm-level analysis indicates that economic, environmental, and social scores have effect on stock returns, however, significance and direction of these effects change, depending on the included control variables in the cross-sectional regression. (original abstract)
- Amman, M., Oesch, D., & Schmid, M. M. (2011). Corporate Governance and Firm Value: International Evidence. Journal of Empirical Finance, 18(1), 36-55.
- Aras, G. (2015). The Effect of Corporate Governance Practices on Financial Structure in Emerging Markets: Evidence from BRICK Countries and Lessons for Turkey. Emerging Markets Finance and Trade, 51(2), 5-24.
- Bali, T. G., Brown, S. J., & ve Çağlayan, M. O. (2014). Macroeconomic Risk and Hedge Fund Returns. Journal of Financial Economics, 114, 1-19.
- Bali, T. G., Cakici, N., & Whitelaw, R. F. (2011). Maxing out: Stocks as Lotteries and the Cross-Section of Expected Returns. Journal of Financial Economics, 99, 427-446.
- Bali, T. G., Cakici, N. & Tang, Y. (2009). The Conditional Beta and the Cross-Section of Expected Returns. Financial Management, 38(1), 103-137.
- Bhagat, S., & Bolton, B. (2008). Corporate Governance and Firm Performance. Journal of Corporate Finance, 14(3), 257- 273.
- Brown, L. D., & Caylor, M. L. (2009). Corporate Governance and Firm Operating Performance. Review of Quantitative Finance and Accounting, 32(2), 129-144.
- Callan, S. J., & Thomas, J. M. (2009). Corporate Financial Performance and Corporate Social Performance: An Update and Reinvestigation. Corporate Social Responsibility and Environmental Management, 16(2), 61-78.
- Saban Celik, Bora Aktan, Manuela Tvaronaviciene, Linkage between company scores and stock Pelin Bengitoz returns
- Core, J. E., Guay, W. R., & Rusticus, T. O. (2006). Does Weak Governances Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors' Expectations. The Journal of Finance, 61(2), 655- 687.
- Dobrovolskienė, N., Tvaronavičienė, M., Tamošiūnienė, R. (2017). Tackling projects on sustainability: a Lithuanian case study. Entrepreneurship and Sustainability Issues, 4(4), 477-488. https://doi.org/10.9770/jesi.2017.4.4(6)
- Fama, E. F. & MacBeth, J. D. (1973). Risk, Return, and Equilibrium: Empirical Tests. The Journal of Political Economy, 81(3), 607-636.
- Fama, E. F. & French K. R. (1996). Multifactor Explanations of Asset Pricing' Anomalies. The Journal of Finance, 51(1), 55-84.
- Fama, E. F. & French K. R. (1995). Size and Book-to-Market Factors in Earnings and Returns. The Journal of Finance, 50(1), 131-155.
- Fama, E. F. & French K. R. (1993). Common Risk Factors in the Returns on Stocks and Bonds. The Journal of Financial Economics, 33, 3-56.
- Ignatavičius, R.; Tvaronavičienė, M.; & Piccinetti, L. (2015). Sustainable development through technology transfer networks: case of Lithuania. Journal of Security and Sustainability Issues, 4(3), 261-267. http://dx.doi.org/10.9770/jssi.2015.4.3(6)
- McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social responsibility and firm financial performance. The Academy of Management Journal, 31(4), 854-872.
- Melas, V., Lisin, E., Tvaronavičienė, M., Peresadko, G., & Radwański, R. (2017). Energy security and economic development: renewables and the integration of energy systems. Journal of Security and Sustainability Issues, 7(1), 133-139. https://doi.org/10.9770/jssi.2017.7.1(11)
- Michailova, J., Mačiulis, A., & Tvaronavičienė, M. (2017). Overconfidence, risk aversion and individual financial decisions in experimental asset markets. Economic research = Ekonomska istraživanja, 30(1), 1119-1131. http://dx.doi.org/10.1080/1331677X.2017.1311234
- Mingaleva, Z., Sheresheva, M., Oborin, M., & Gvarliani, T. (2017). Networking of small cities to gain sustainability. Entrepreneurship and Sustainability Issues, 5(1), 140-156. https://doi.org/10.9770/jesi.2017.5.1(12)
- Nollet, J., Filis, G., & Mitrokostas, E. (2016). Corporate Social Responsibility and Financial Performance: A Non- Linear and Dissaggreted Approach. Economic Modelling, 52(Part B), 400-407.
- Pava, M. L., & Krausz, J. (1996). The Association between Corporate Social Responsibility and Financial Performance: The Paradox of Social Cost. Journal of Business Ethics, 15(3), 321-357.
- Render, A., Gaeremynck, A., & Sercu, P. (2010). Corporate-Gpvernance Ratings and Company Performance: A Cross-European Study. Corporate Governance: An International Review, 18(2), 87-106.
- Ruf, B. M., Muralidhar, K., Brown, R. M., Janney, J. J., & Paul, K. (2001). An Empirical Investigation of the Relationship between Change in Corporate Social Performance and Financial Performance: A Stakeholder Theory Perspective. Journal of Business Ethics, 32(2), 143-156.
- Tvaronavičienė, M.; Černevičiūtė, J. 2015. Technology transfer phenomenon and its impact on sustainable development. Journal of Security and Sustainability Issues, 5(1), 87-97. http://dx.doi.org/10.9770/jssi.2015.5.1(7)
- Umutlu, M. (2015). Idiosyncratic Volatility and Expected Returns at the Global Level. Financial Analysts Journal, 71, 58-71.