Proceedings of Global Business and Social Science Research Conference
11 - 13 May 2015, Grand Mirage Hotel, Bali, Indonesia, ISBN: 978-1-922069-75-7
The Relation Social-Financial Performance in Different Industries
and Liquidity Risk Factor
Homayoon Shalchian and Bouchra M’Zali
Several studies such as Waddock and Graves (1997) and Brammer et al. (2006) suggest that
different dimensions of corporate social responsibility (CSR) may have different relation with
financial performance. Also, Griffin and Mahon (1997) argue that some dimensions such as
environment could constitute a stronger signal in some industries such as Mining and chemical
industry while other dimensions such as employee welfare seem to be more important in other
industries (ex: wholesale and retail). Further, several studies such as Holmstrom and Tirole
(2001) and Pastor and Stambaugh, (2003) show that expected stock returns are related to the
fluctuations in aggregate liquidity risk factor.
This paper consists of a portfolio study in which we attempt to analyze the impact of different
dimensions of corporate social performance in different industries considering Pastor and
Stambault’s liquidity risk factor. Our results show that in most industries and based on most
dimensions of CSR, the high ranked portfolios outperformed the low ranked portfolios.
However, the gap between the abnormal returns are larger for the dimension “environment” in
the industry “Mining and chemicals” and “Manufacturing” while in “Services” industry the
dimensions “Employees welfare” constitutes a stronger signal relative to the other dimensions.
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Homayoon Shalchian (Ph.D), professor of finance in the School of Commerce at Laurentian University, 935
Ramsey Lake Road, Sudbury (Ontario), Canada, P3E 2C6, Tel: (705) 675-1151, E-mail:
hshalchian@laurentian.ca
Bouchra M’Zali (Ph.D), CRG-ESCA,CRSDD professor in the school of Business Administration at University of
Quebec at Montreal, C.P. 6192, Succursale Centre-Ville, Montreal (Quebec), Canada, H3C 4R2, Tel: 514-9874689, Fax: (514) 987-0422, E-mail: mzali.bouchra@uqam.ca