The Effects of Racial Equity Pledge Making on Firms' Stock Valuation Público

Abstract

In the wake of the Summer 2020 Black Lives Matter movement, firms made over $67 Billion dollars worth of pledges to racial equity. This paper explores the effect of these pledges as a representation of racially focused positive Corporate Social Responsibility (CSR) activity on the market valuation of the firms that made them using event study and difference-in-differences designs to study the relationship between CSR and perceived firm performance and profitability. The event study reveals a short term negative effect on logged firm stock value, followed by a generally positive trend over the ten weeks following making a pledge. The difference-in-difference results reveal a statistically insignificant -0.84% decrease in stock value for firms in the 10 weeks following a pledge. Heterogeneity tests show that a short-term positive effect may appear for firms that made smaller pledges, suggesting that investors might value these racial equity pledges when they are not too costly. Robustness and randomization checks validate these findings. 

Table of Contents

Contents

List of Figures

List of Tables

1. Introduction - 1

2. Data - 10

3. Methodology - 15

4. Results - 19

5. Robustness - 23

6. Conclusion - 26

7. Bibliography - 28

8. Appendix - 31

About this Honors Thesis

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School	Emory College
Department	Economics
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Economics, Finance
Palavra-chave	Market Valuation Environmental, Social, and Governance Factors (ESG) Corporate Social Responsibility (CSR) Economics Finance Racial Equity Pledges
Committee Chair / Thesis Advisor	Karbownik, Krzysztof (Chris) , Emory University
Committee Members	Bolton, Alexander, Emory University Kim, Jeong-Ho (John), Emory University

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