Kappou and Oikonomou (2016)

Kappou, Konstantina, and Ioannis Oikonomou.  “Is there a Gold Social Seal? The Financial Effects of Additions to and Deletions from Social Stock Indices.”  Journal of Business Ethics, February 2016.

From the authors’ abstract: “This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns.”

Link:  https://link.springer.com/article/10.1007/s10551-014-2409-z