Bouchra M’Zali

Social Performance and Firm Risk: Impact of the Financial Crisis

Abstract This paper examines the impact of the recent financial crisis (2008–2009) on the relation between a firm’s risk and social performance (SP) using a sample of non-financial U.S. firms covering the period 1991–2012. We find that the relation between SP and risk is significantly different in the crisis period (post-crisis period) compared to the pre-crisis period. SP reduces volatility during the financial crisis. The risk reduction potential of SP is mainly due to the strengths component of SP. Since the relation of risk is stronger with SP strengths than SP concerns, this implies an asymmetric relation between these SP components and a firm’s risk. Specifically, strengths act as a risk reduction tool during an adverse economic environment.

Social Performance and Financial Performance: A Controversial Relationship

Different factors explaining divergent results on the relationship between corporate Social Performance (SP) and Financial Performance (FP) can be found in the academic literature. The main objective of this chapter is to test the impact of these factors on these divergent results. It also aims to assess the intensity of the sensitivity of this relationship to these factors considered individually or in combination. The results of our experimental research show that the estimated relationship depends on the methodological choice. More specifically, the relationship varies according to the measurement of the SP, the measurement of FP and the chosen sample. This relationship is neither stable nor necessarily linear, as many relevant academic works in the literature assume. This work concentrates on the knowledge gained from this literature and suggests lines of reflection to better understand the studied relationship in a field which is still evolving.

A Multi-Dimensional Analysis of Corporate Social Responsibility: The Liquidity Risk Factor

This study is an extension to Shalchian et al. (2015) and investigates the effect of the “liquidity” risk factor on the performance of socially responsible investments in different industries and based on different dimensions of corporate social responsibility. Using Pastor and Stambault’s liquidity risk factor, we find that in the mining industry and based on the dimensions of “environment”, “employees’ relations” and “community involvement”, socially responsible investments are relatively less exposed to the liquidity risk factor. Our results also suggest that compared to conventional investments in the manufacturing and service industries, socially responsible investment’s performance is more sensitive to the liquidity risk factor.

Ranking Socially Responsible Mutual Funds Based on the Particular Preferences of the Decision Maker

Several methods for ranking mutual funds based on financial performance have been developed, but few of them propose a ranking methodology based on their non-financial performance. The aim of this chapter is to present two ranking methods for mutual funds based on their socially responsible performance. The ranking approaches suggested can be understood as complement financial information which can help socially responsible mutual fund managers, individual and institutional investors in their portfolio selection process. Both methods use multiple criteria decision analysis (MCDA) techniques, namely, one is based on AHP (Analytic Hierarchy Process) and the other one apply MACBETH (Measuring Attractiveness by a Categorical Based Evaluation Technique). The results reveal that an integrated framework using multiple criteria decision analysis (MCDA) techniques could help the investor in selecting a suitable socially responsible mutual funds portfolio, because the consideration of several criteria reflect more precisely the multiple dimensions of this decision making problem.