Changes in the Covalence Ethical Quote, Financial Performance and Financial Reporting Quality

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• 作者：Fayez A. Elayan ; Jingyu Li ; Zhefeng Frank Liu…
• 关键词：Ethical performance ; FRQ ; Corporate social responsibility ; FP
• 刊名：Journal of Business Ethics
• 出版年：2016
• 出版时间：March 2016
• 年：2016
• 卷：134
• 期：3
• 页码：369-395
• 全文大小：594 KB
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• 作者单位：Fayez A. Elayan (1)
  Jingyu Li (1)
  Zhefeng Frank Liu (1)
  Thomas O. Meyer (2)
  Sandra Felton (1)
  
  1. Department of Accounting, Goodman School of Business, Brock University, St. Catharines, ON, L2S 3A1, Canada
  2. Southeastern Louisiana University, Hammond, LA, USA
  
• 刊物类别：Humanities, Social Sciences and Law
• 刊物主题：Philosophy
  Ethics
  Economic Growth
  Management
  Quality of Life Research
  
• 出版者：Springer Netherlands
• ISSN：1573-0697

文摘

We examine the equity valuation effect of press releases of upgrades or downgrades reflected in the Covalence Ethical Quote (CEQ), an index ranking the ethical performance of multinational firms. The index is updated quarterly and is comprehensive enough to include 45 criteria reflecting working conditions, impact of product, impact of production, and company institutional impact. Thus, it captures many dimensions of firms’ ethical performance that are not accounted for in previous research. Our research encompasses a joint test of the value relevance of the index itself and the impact of ethical reputation on a firm’s value. We find first a significant causal relationship between stock market reactions and changes in the CEQ. Specifically, disclosures of positive (negative) changes in firm ethical performance cause increases (decreases) in firm value. Second, cross-sectional analysis indicates a positive association between changes in firm ethical performance and both its financial performance and its financial reporting quality. Collectively, these results suggest that the CEQ conveys information that is useful to investors. Further, corporate measures taken to increase ethical performance are associated with positive benefits to shareholders. Finally, investors have concluded that good news about their firms’ efforts to be ethical is worth the cost.