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, access via your institution.
Buy single article
Instant access to the full article PDF.
Price excludes VAT (USA)
Tax calculation will be finalised during checkout.
Center for Research in Security Prices
Corporate social responsibility
Dow Jones Sustainability Index
Financial Times and London Stock Exchange
Global Reporting Initiative
Kinder, Lyndenberg, Domini
Securities and Exchange Commission
Socially Responsible Investment
Bartov, E.: 1992, ‘Patterns in Unexpected Earnings as an Explanation for Post-Announcement Drift’, Accounting Review, 67(3), 610-622.
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.
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.
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.
Cornell, B. and A. Shapiro: 1987, ‘Corporate Stakeholders and Corporate Finance’. Financial Management, 16, 5-14.
Curran M. and D. Moran : 2007, ‘Impact of the FTSE4Good on Firm Price: An event study’. Journal of Environmental Management, 82, 529-537.
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.
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.
Dubbink, W., J. Graafland, and L. van Liedekerke: 2008, ‘CSR, transparency and the role of intermediate organizations’, Journal of Business Ethics, 82, 391-406.
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.
Fombrun, C. J. and M. Shanley: 1990, ‘What’s in a Name? Reputation Building and Corporate Strategy’, Academy of Management Journal, 33, 233-258.
Fowler, S. J. and C. Hope: 2007. ‘A Critical Review of Sustainable Business Indices and their Impact’, Journal of Business Ethics, 76, 243-252.
Frederick, W. C.: 1995, Values, Nature, and Culture in the American Corporation (New York: Oxford University Press).
Griffin, J. J. and J. F. Mahon: 1997, ‘The Corporate Social Performance and Corporate Financial Performance Debate’, Business & Society, 36(1), 5-31.
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.
Hennessey, S.: 1993, ‘Can Active Managers Profit from Earnings Forecast Revisions?’, Canadian Investment Review, 6(2), 39-47.
King, A.: 1995, ‘Avoiding Ecological Surprise: Lessons from Long-Standing Communities’, Academy of Management Review, 20(4), 961-985.
Latane, H. A. and C. P. Jonnes: 1979, ‘Standardized Unexpected Earnings – 1971-77’, Journal of Finance, 34(3), 717-724.
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.
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.
McGuire, J. B., A. Sundgren and T. Schneeweis: 1988, ‘Corporate Social Responsibility and Firm Financial Performance’, Academy of Management Journal, 31(4), 854-872.
McWilliams, A. and D. Siegel: 1997, ‘Event Studies in Management Research: Theoretical and Empirical Issues’, Academy of Management Journal, 40(3), 626-657.
Orlitzky, M. and J. Benjamin: 2001, ‘Corporate Social Performance and Firm Risk: A Meta-Analytic Review’, Business & Society, 40(4), 369-396.
Orlitzky, M., F. L. Schmidt and S. Rynes: 2003, ‘Corporate Social and Financial Performance: A Meta-Analysis’, Organization Studies, 24(3), 403-411.
Peloza, J.: 2009, ‘The Challenge of Measuring Financial Impacts from Investments in Corporate Social Performance,’ Journal of Management, 35 (6), 1518-1541.
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.
Roberts, P. W. and G. R. Dowling: 2002, ‘Corporate Reputation and Sustained Superior Financial Performance’, Strategic Management Journal, 23(12), 1077-1093.
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.
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.
Smith, C. N.: 2003, ‘Corporate Social Responsibility: Whether or How?’. California Management Review, 45(4), 52-76.
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.
Waddock, S. A. and S. B. Graves: 1997, ‘The Corporate Social Performance-Financial Performance Link’, Strategic Management Journal, 18(4), 303-319.
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.
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