Skip to main content
SpringerLink
Log in

Signaling Sustainability Leadership: Empirical Evidence of the Value of DJSI Membership

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

We explore the relationship between corporate sustainability, reputation, and firm value by asking whether signaling sustainability leadership through membership on a recognized sustainability index is value generating. Increasingly, stakeholders are demanding that firms demonstrate their commitment to sustainability. One signal that companies can send to stakeholders to indicate that they are sustainability leaders is membership on a recognized “best in class” sustainability index. This article explores both the short-term and the intermediary impact on North American firms of being included or removed from the Dow Jones Sustainability World Index (DJSI). Our results provide evidence that being added to the DJSI results in a sustained increase in a firm’s share price, suggesting that the benefits of being included on the DJSI outweigh the costs associated with applying. This article also notes a temporary decrease in the value of firms for the first 10 days after their removal from the DJSI; however, this effect is eliminated within the next ten trading days.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Abbreviations

CRSP:

Center for Research in Security Prices

CSR:

Corporate social responsibility

DJSI:

Dow Jones Sustainability Index

FP:

Financial performance

FTSE:

Financial Times and London Stock Exchange

GRI:

Global Reporting Initiative

KLD:

Kinder, Lyndenberg, Domini

SEC:

Securities and Exchange Commission

SRI:

Socially Responsible Investment

References

  • Bartov, E.: 1992, ‘Patterns in Unexpected Earnings as an Explanation for Post-Announcement Drift’, Accounting Review, 67(3), 610-622.

    Google Scholar 

  • Bertels, S. and J. Peloza: 2008, ‘‘Running Just to Stand Still? Managing CSR Reputation in an Era of Ratcheting Expectations’. Corporate Reputation Review, 11, 56-72.

    Article  Google Scholar 

  • Chen, H., G. Noronha, and V. Singal: 2004, ‘The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation’. Journal of Finance, 59, 1901-1929.

    Article  Google Scholar 

  • Consolandi, C., A. Jaiswal-Dale, E. Poggiani, and A.Vercelli: 2008, ‘Global Standards and Ethical Stock Indexes: The Case of the Dow Jones Sustainability Stoxx Index’. Journal of Business Ethics, 87, 185-197.

    Article  Google Scholar 

  • Cornell, B. and A. Shapiro: 1987, ‘Corporate Stakeholders and Corporate Finance’. Financial Management, 16, 5-14.

    Article  Google Scholar 

  • Curran M. and D. Moran : 2007, ‘Impact of the FTSE4Good on Firm Price: An event study’. Journal of Environmental Management, 82, 529-537.

    Article  Google Scholar 

  • Docking, D. S. and R. J. Dowen: 2006, ‘Evidence on Stock Price Effects Associated with Changes in the S&P 600 Small Cap Index’. Quarterly Journal of Business & Economics, 45, 89-114.

    Google Scholar 

  • Doh, J. P., S. D. Howton, S. W. Howton, D. S. Siegel: 2010 ‘Does the Market Respond to an Endorsement of Social Responsibility? The Role of Institutions, Information and Legitimacy’. Journal of Management, 36(6), 1461-1485.

    Article  Google Scholar 

  • Dubbink, W., J. Graafland, and L. van Liedekerke: 2008, ‘CSR, transparency and the role of intermediate organizations’, Journal of Business Ethics, 82, 391-406.

    Article  Google Scholar 

  • Epstein, M. J. and K. E. Schneitz: 2002, ‘Measuring the Cost of Environmental and Labor Protests to Globalization: An Event Study of the Failed 1999 Seattle WTO Talks.’ The International Trade Journal, 16, 129-160.

    Article  Google Scholar 

  • Fombrun, C. J. and M. Shanley: 1990, ‘What’s in a Name? Reputation Building and Corporate Strategy’, Academy of Management Journal, 33, 233-258.

    Article  Google Scholar 

  • Fowler, S. J. and C. Hope: 2007. ‘A Critical Review of Sustainable Business Indices and their Impact’, Journal of Business Ethics, 76, 243-252.

    Article  Google Scholar 

  • Frederick, W. C.: 1995, Values, Nature, and Culture in the American Corporation (New York: Oxford University Press).

    Google Scholar 

  • Griffin, J. J. and J. F. Mahon: 1997, ‘The Corporate Social Performance and Corporate Financial Performance Debate’, Business & Society, 36(1), 5-31.

    Article  Google Scholar 

  • Harris, L. and E. Gurel: 1986, ‘Price and Volume Effects Associated with Changes in the S&P 500: New Evidence for the Existence of Price Pressures’, Journal of Finance, 41(4), 815-830.

    Article  Google Scholar 

  • Hennessey, S.: 1993, ‘Can Active Managers Profit from Earnings Forecast Revisions?’, Canadian Investment Review, 6(2), 39-47.

    Google Scholar 

  • King, A.: 1995, ‘Avoiding Ecological Surprise: Lessons from Long-Standing Communities’, Academy of Management Review, 20(4), 961-985.

    Google Scholar 

  • Latane, H. A. and C. P. Jonnes: 1979, ‘Standardized Unexpected Earnings – 1971-77’, Journal of Finance, 34(3), 717-724.

    Article  Google Scholar 

  • Lopez, M. V., A. Garcia and L. Rodriguez: 2007, ‘Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index’, Journal of Business Ethics, 75, 285-300.

    Article  Google Scholar 

  • Lynch, A. W. and R. R. Mendenhall: 1997, ‘New Evidence on Stock Price Effects Associated with Changes in the S&P 500 Index’, Journal of Business, 70(3), 257-300.

    Google Scholar 

  • McGuire, J. B., A. Sundgren and T. Schneeweis: 1988, ‘Corporate Social Responsibility and Firm Financial Performance’, Academy of Management Journal, 31(4), 854-872.

    Article  Google Scholar 

  • McWilliams, A. and D. Siegel: 1997, ‘Event Studies in Management Research: Theoretical and Empirical Issues’, Academy of Management Journal, 40(3), 626-657.

    Article  Google Scholar 

  • Orlitzky, M. and J. Benjamin: 2001, ‘Corporate Social Performance and Firm Risk: A Meta-Analytic Review’, Business & Society, 40(4), 369-396.

    Article  Google Scholar 

  • Orlitzky, M., F. L. Schmidt and S. Rynes: 2003, ‘Corporate Social and Financial Performance: A Meta-Analysis’, Organization Studies, 24(3), 403-411.

    Article  Google Scholar 

  • Peloza, J.: 2009, ‘The Challenge of Measuring Financial Impacts from Investments in Corporate Social Performance,’ Journal of Management, 35 (6), 1518-1541.

    Article  Google Scholar 

  • Rindova, V. P., I. O. Williamson, A. P. Petkova, and J. M. Sever: 2005, ‘Being Good or Being Known: An Empirical Examination of the Dimensions, Antecedents, and Consequences of Organizational Reputation’, Academy of Management Journal, 48(6), 1033-1049.

    Article  Google Scholar 

  • Roberts, P. W. and G. R. Dowling: 2002, ‘Corporate Reputation and Sustained Superior Financial Performance’, Strategic Management Journal, 23(12), 1077-1093.

    Article  Google Scholar 

  • Sabate, J. M. d. l. F. and E. d. Q. Puente: 2003, ‘Empirical Analysis of the Relationship between Corporate Reputation and Financial Performance: A Survey of the Literature’, Corporate Reputation Review, 6(2), 161-177.

    Article  Google Scholar 

  • Sen, S. and C. B. Bhattacharya: 2001, ‘Does Doing Good Always Lead to Doing Better? Consumer Reactions to Corporate Social Responsibility’, Journal of Marketing Research, 38(2), 225-243.

    Article  Google Scholar 

  • Smith, C. N.: 2003, ‘Corporate Social Responsibility: Whether or How?’. California Management Review, 45(4), 52-76.

    Google Scholar 

  • Vilanova, M, J. M. Lozano, and D. Arenas: 2009, ‘Exploring the nature of the relationship between CSR and competitiveness’, Journal of Business Ethics, 87, 57-69.

    Article  Google Scholar 

  • Waddock, S. A. and S. B. Graves: 1997, ‘The Corporate Social Performance-Financial Performance Link’, Strategic Management Journal, 18(4), 303-319.

    Article  Google Scholar 

  • Williams, R. J. and J. D. Barett: 2000, ‘Corporate Philanthropy, Criminal Activity, and Firm Reputation: Is There a Link?’. Journal of Business Ethics, 26(4), 341-350.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Haskayne School of Business, University of Calgary, Calgary, AB, Canada

    Michael Robinson & Anne Kleffner

  2. Faculty of Business, Simon Fraser University, Vancouver, BC, Canada

    Stephanie Bertels

Authors
  1. Michael Robinson
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Anne Kleffner
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Stephanie Bertels
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Stephanie Bertels.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Robinson, M., Kleffner, A. & Bertels, S. Signaling Sustainability Leadership: Empirical Evidence of the Value of DJSI Membership. J Bus Ethics 101, 493–505 (2011). https://doi.org/10.1007/s10551-011-0735-y

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-011-0735-y

Keywords

Search

Navigation