Does the Stock Market Value Inclusion on a Sustainability Index? An Event Study using the Dow Jones Sustainability North America Index

• In Event: Social Media and Trends in Accounting Research

Abstract

The concept of socially responsible investing (SRI) has evolved into a mainstream strategy for investments. Investors who place value on sustainability use SRI strategies to make investment decisions. Companies send a signal to stakeholders, including investors, that they are sustainability leaders by being recognized as a member of a sustainability index. This paper analyzes the impact of the announcement that a company is added to, removed from, or remains on the Dow Jones North America Sustainability Index (DJSINA) on its stock price. An event study is used to measure the impact of the announcement by analyzing the abnormal stock returns over a 12-year period. The results indicate that a deletion (addition) of a company from (to) the DJSINA has a temporary negative (positive) impact on its stock price. However, after excluding the inaugural year of the DJSINA, only deletions from the index have a statistically significant impact on stock price.

Authors

• Robert Baumann, College of the Holy Cross

• Lauren Hayward, College of the Holy Cross

• Victor Matheson, College of the Holy Cross

• Karen Tucker Teitel, College of the Holy Cross