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This paper aims to investigate the effects of separate components of corporate social responsibility—social and environmental efforts in particular—on a firm’s operating profit margin, dividends per share and net debt. It also investigates whether such efforts can reduce firm exposure to market risk. One or a combination of these factors may consequently be responsible for lower expected returns on firms with greater ES ratings. For this purpose we study firms on the FTSE-100 and the HDAX from the period 2002-2014. Environmental and social scores for these firms are regressed against operating profit margin, dividends per share and net debt while controlling for relevant factors. The firms are then divided into groups based on their environmental and social rankings and we compare the covariance of their returns with market returns to gauge the relation of their sensitivity (beta) to ES scores. The results of the first part of the study indicate that ES scores are more strongly correlated with OPM, Div/Share and Net debt in HDAX than in FTSE-100. In addition there is a slight positive correlation between firm beta and ES scores, implying increased exposure to market risk.
This paper examines the association between LGBT‐friendly corporate policies and firm performance. Using data on US firms from 2003 to 2016, we document that LGBT friendliness is positively associated with firm performance. Specifically, we find strong evidence that more LGBT‐friendly firms have higher profitability and higher stock market valuations. Our results further demonstrate that the positive effect of progressive LGBT policies on firm performance is more pronounced for firms located in more liberal states. Overall, our empirical findings provide support for the view that socially progressive corporate policies and diversity management may create value for the firm.