Unexpected social performance and share returns in South African companies: an event study methodology
by Paul-Francois Muzindutsi
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 11, No. 3, 2018

Abstract: This paper used event study methodology to analyse whether South African companies' returns are affected by unexpected increases or declines in their social performance. Using daily returns spanning from 2004 to 2014, this study found that abnormal returns of companies added to the South African Socially Responsible Investment (SRI) index for the first time were not statistically significant during the event period. Companies removed from the SRI index earned significant negative abnormal returns. This means that unexpected increases in companies' social performance has no effect on companies' returns; while unexpected declines in companies' social performance tend to affect companies' returns negatively. This study concludes that South African socially responsible investors consider unexpected decline in companies' social performance as bad news.

Online publication date: Fri, 27-Jul-2018

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