Linkage between Corporate Social Performance and Stock Return: An Evidence from Financial Sector of Bangladesh
Posted: 12 Jun 2017
Date Written: June 9, 2017
Fierce global competition and shrinking markets are forcing firms towards sustainable profitability. In order to accomplish sustainable profitable business, companies around the world are highly emphasizing on Corporate Social Performance (CSP). Bangladeshi banking and financial sectors are no exception to this trend. Researchers around the world have reported a positive, negative, mixed and neutral impact of CSP on stock return. On this background, this study examines the impact of CSP on stock return in the financial sector of Bangladesh.Data sample covers 30 banks and 23 financial institutions listed in Dhaka Stock Exchange (DSE). CSR reports, websites, regulatory notifications, newspaper articles of 2013 were used for the measurement of CSP and for stock return and other control variables, data of 2014 were used. Logistic Regression was applied to identify the relationships between the variables. The results of the study indicate that, CSP has a positive significant relationship with stock return. Also a positive relation between bank size and higher CSP was revealed. It was evident that investors are sensitive to the corporate social responsibility and firm’s positive engagement with the social responsibility does increase the value of stock. Findings of the study are expected to improve the investment climate by encouraging the investors to make their investment decisions based on long-term sustainability. The current study has several policy implications. Based on the findings of the study policy-makers should undertake policy measures to encourage firms to enhance their socially responsible activities. Regulatory bodies such as Bangladesh Bank, Bangladesh Securities Exchange Commission, and Insurance Development & Regulatory Authority Bangladesh (IDRAB) might consider making corporate social and environmental disclosure mandatory to make information easily accessible to the investors. By considering the constraints of considering only bank and financial institutions in this study, a more comprehensive study by covering various industries, having cross-dimensional analysis, is suggested for further studies.
Keywords: CSR, Stock Return, Financial Institutions, Banks
JEL Classification: G21, G23, G31, H54
Suggested Citation: Suggested Citation