A Note on Social Responsibility and Stock Valuation

Abstract

The article discusses social responsibility and stock valuation. An empirical study was made of investors valuation of nine paper companies after substantial publicity was released about their pollution tendencies. Cross-section valuation models were prepared for the four quarters beginning just prior to the publicity. Both institutional purchases and price changes were analyzed to determine the impact of undesirable publicity. The authors look at a correlation between profitability and good pollution control.