Ioannis Oikonomou | University of Reading (original) (raw)
Uploads
Papers by Ioannis Oikonomou
SSRN Electronic Journal, 2000
Firms typically present a mixed picture of corporate social performance (CSP), with positive and ... more Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders' judgements of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa.
Journal of Management Studies, 2013
ABSTRACT Firms typically present a mixed picture of corporate social performance (CSP), with posi... more ABSTRACT Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders' judgments of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa. Building on social judgment theory, we present two alternative accounts of how stakeholders respond to such complexity, which provide differing implications for the financial effects of CSP: reciprocal dampening and rewarding uniformity. Echoing notable findings on strategic consistency, our US panel study finds that firms that exhibit uniformly positive or uniformly negative indicators in particular dimensions of CSP outperform firms that exhibit a mixed picture of positives and negatives, which supports the notion that stakeholders' judgments of CSR reward uniformity.
This thesis attempts to make original contributions on the empirical relationship between corpora... more This thesis attempts to make original contributions on the empirical relationship between corporate social responsibility and firm financial performance in a variety of ways. First, I investigate the wealth-protective effects of socially responsible firm behaviour by examining its association with equity risk for an extensive panel data sample of S&P 500 companies. Special consideration is given to downside risk and investor utility. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and corporate social irresponsibility is positively and strongly related to financial risk. However, the risk-return tradeoff appears to be such that no clear utility gain or loss can be realized by investing in firms characterised by specific levels of social and environmental performance. Overall volatility A Ph.D. is a solitary experience. Or so it is said. The purpose of this part of the thesis will be to counter this statement. First and foremost, I would like to express my deepest gratitude to my supervisors, Chris Brooks and Stephen Pavelin for their guidance, support and the unwavering faith that they showed in me. Chris"s supervising approach and academic mindset have been a perfect match with my needs as a doctoral researcher. His knowledge, experience, communicative efficiency, willingness to provide enough guidance to steer me towards the right direction but not so much as to suffocate my own critical thinking and creative abilities are qualities that I could not have hoped for my ideal supervisor to have. Stephen has been immensely helpful in making me think harder about the motivations, potential contributions, importance and positioning of my work. He has encouraged me greatly in my efforts and generously shared his in-depth understanding of the business case for corporate social responsibility. The work ethic and eloquence of both of them have also been truly inspiring. Furthermore, I would like to thank the ICMA Centre for the scholarships that it has granted me during the entirety of my postgraduate studies. Leaving my homeland to pursue my aspirations would have been impossible without this funding. Many faculty members of the ICMA Centre have also assisted me in a number of ways. Discussions with Simone Varotto, Jacques Pezier and Alfonso Dufour have increased my understanding of some of the more technical issues of this thesis. My sincere thanks also go to Mike Smith, Carol
This is the first study to investigate the impact of the choice of optimization technique when co... more This is the first study to investigate the impact of the choice of optimization technique when
constructing Socially Responsible Investing (SRI) portfolios, and to highlight the importance of
the selection of the optimization method within this specialized industry. Using data from MSCI
KLD on the social responsibility of US firms, we form SRI portfolios based on six different
approaches and compare their performance along the dimensions of risk, risk-return trade-off,
diversification and stability. Our results indicate that the more “formal” optimization approaches
(Black-Litterman, Markowitz and robust estimation) lead to portfolios that are both less risky
and have superior risk-return trade-offs; but at the cost of unstable asset allocations and lower
diversification. More simplistic approaches to asset allocation (naïve diversification, reward-torisk
and risk-parity) are less effective in producing well-performing portfolios, but are associated
with greater diversification and asset stability. While the three formal approaches have higher
transactions costs, their net returns are appreciably larger than those of the three more simplistic
approaches. Our main conclusions are robust to a series of tests, including the use of different
estimation windows, stricter screening criteria, and 14 different metrics for evaluating portfolio
performance. While there are some differences in performance when individual aspects of
corporate social performance are used to select the sample companies, our conclusions are
broadly confirmed.
This study focuses on the wealth-protective effects of socially responsible firm behavior by exam... more This study focuses on the wealth-protective effects of socially responsible firm behavior by
examining the association between corporate social performance (CSP) and financial risk for an
extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In
addition, the link between CSP and investor utility is investigated. The main findings are that
corporate social responsibility is negatively but weakly related to systematic firm risk and that
corporate social irresponsibility is positively and strongly related to financial risk. The fact that
both conventional and downside risk measures lead to the same conclusions adds convergent
validity to the analysis. However, the risk-return trade-off appears to be such that no clear utility
gain or loss can be realized by investing in firms characterized by different levels of social and
environmental performance. Overall volatility conditions of the financial markets are shown to
play a moderating role in the nature and strength of the CSP-risk relationship.
This study investigates the financial effects of additions to and deletions from two of the most ... more This study investigates the financial effects of additions to and deletions from two of the most well-known social stock indices: the Calvert social index and the MSCI KLD 400 index. By examining not only short-term abnormal returns but also trading activity, earnings per share and long-term performance of stocks that are involved in these events, we are able to shed new light on the characteristics of the “social index effect”. We find that the addition of a stock to either index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns of approximately -1.5% in the short run that can reach -14% six months after the event. Trading volumes for deleted stocks are significantly increased on the event date and operational performance of the respective firms deteriorates after their deletion from the social index. These findings are consistent with the asymmetric financial effects of corporate social performance that are connected to social index re-compositions.
We investigate the relationship between corporate and country sustainability on the cost of bank ... more We investigate the relationship between corporate and country sustainability on the cost of
bank loans. We look into 470 loan agreements signed between 2005 and 2012 with borrowers
based on 28 different countries across the world and operating in all major industries. Our
principal findings reveal that country sustainability related to both social and environmental
frameworks has a statistically and economically impactful effect on direct financing of economic
activity. An increase of one unit in country sustainability scores is associated with an average
decrease in the costs of debt by 64 basis points. Our analysis shows that the environmental
dimension of a country’s institutional framework is approximately two times as impactful as the
societal dimension when it comes to determining the cost of corporate loans. On the other
hand, we find no conclusive evidence that firm-level sustainability influences the interest rates
charged to borrowing firms by banks.
This study investigates the differential impact that various dimensions of corporate social perfo... more This study investigates the differential impact that various dimensions of corporate social
performance have on the pricing of corporate debt as well as the assessment of the credit
quality of specific bond issues. The empirical analysis, based on an extensive longitudinal
dataset, suggests that overall, good performance is rewarded and corporate social
transgressions are penalised through lower and higher corporate bond yield spreads
respectively. Similar conclusions can be drawn when focusing on either the bond rating
assigned to a specific debt issue or the probability of it being considered to be an asset of
speculative grade. Additional investigation shows that these relationships are more
pronounced for bonds with higher maturities and those issues assigned with either high or
very low ratings.
SSRN Electronic Journal, 2000
Firms typically present a mixed picture of corporate social performance (CSP), with positive and ... more Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders' judgements of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa.
Journal of Management Studies, 2013
ABSTRACT Firms typically present a mixed picture of corporate social performance (CSP), with posi... more ABSTRACT Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders' judgments of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa. Building on social judgment theory, we present two alternative accounts of how stakeholders respond to such complexity, which provide differing implications for the financial effects of CSP: reciprocal dampening and rewarding uniformity. Echoing notable findings on strategic consistency, our US panel study finds that firms that exhibit uniformly positive or uniformly negative indicators in particular dimensions of CSP outperform firms that exhibit a mixed picture of positives and negatives, which supports the notion that stakeholders' judgments of CSR reward uniformity.
This thesis attempts to make original contributions on the empirical relationship between corpora... more This thesis attempts to make original contributions on the empirical relationship between corporate social responsibility and firm financial performance in a variety of ways. First, I investigate the wealth-protective effects of socially responsible firm behaviour by examining its association with equity risk for an extensive panel data sample of S&P 500 companies. Special consideration is given to downside risk and investor utility. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and corporate social irresponsibility is positively and strongly related to financial risk. However, the risk-return tradeoff appears to be such that no clear utility gain or loss can be realized by investing in firms characterised by specific levels of social and environmental performance. Overall volatility A Ph.D. is a solitary experience. Or so it is said. The purpose of this part of the thesis will be to counter this statement. First and foremost, I would like to express my deepest gratitude to my supervisors, Chris Brooks and Stephen Pavelin for their guidance, support and the unwavering faith that they showed in me. Chris"s supervising approach and academic mindset have been a perfect match with my needs as a doctoral researcher. His knowledge, experience, communicative efficiency, willingness to provide enough guidance to steer me towards the right direction but not so much as to suffocate my own critical thinking and creative abilities are qualities that I could not have hoped for my ideal supervisor to have. Stephen has been immensely helpful in making me think harder about the motivations, potential contributions, importance and positioning of my work. He has encouraged me greatly in my efforts and generously shared his in-depth understanding of the business case for corporate social responsibility. The work ethic and eloquence of both of them have also been truly inspiring. Furthermore, I would like to thank the ICMA Centre for the scholarships that it has granted me during the entirety of my postgraduate studies. Leaving my homeland to pursue my aspirations would have been impossible without this funding. Many faculty members of the ICMA Centre have also assisted me in a number of ways. Discussions with Simone Varotto, Jacques Pezier and Alfonso Dufour have increased my understanding of some of the more technical issues of this thesis. My sincere thanks also go to Mike Smith, Carol
This is the first study to investigate the impact of the choice of optimization technique when co... more This is the first study to investigate the impact of the choice of optimization technique when
constructing Socially Responsible Investing (SRI) portfolios, and to highlight the importance of
the selection of the optimization method within this specialized industry. Using data from MSCI
KLD on the social responsibility of US firms, we form SRI portfolios based on six different
approaches and compare their performance along the dimensions of risk, risk-return trade-off,
diversification and stability. Our results indicate that the more “formal” optimization approaches
(Black-Litterman, Markowitz and robust estimation) lead to portfolios that are both less risky
and have superior risk-return trade-offs; but at the cost of unstable asset allocations and lower
diversification. More simplistic approaches to asset allocation (naïve diversification, reward-torisk
and risk-parity) are less effective in producing well-performing portfolios, but are associated
with greater diversification and asset stability. While the three formal approaches have higher
transactions costs, their net returns are appreciably larger than those of the three more simplistic
approaches. Our main conclusions are robust to a series of tests, including the use of different
estimation windows, stricter screening criteria, and 14 different metrics for evaluating portfolio
performance. While there are some differences in performance when individual aspects of
corporate social performance are used to select the sample companies, our conclusions are
broadly confirmed.
This study focuses on the wealth-protective effects of socially responsible firm behavior by exam... more This study focuses on the wealth-protective effects of socially responsible firm behavior by
examining the association between corporate social performance (CSP) and financial risk for an
extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In
addition, the link between CSP and investor utility is investigated. The main findings are that
corporate social responsibility is negatively but weakly related to systematic firm risk and that
corporate social irresponsibility is positively and strongly related to financial risk. The fact that
both conventional and downside risk measures lead to the same conclusions adds convergent
validity to the analysis. However, the risk-return trade-off appears to be such that no clear utility
gain or loss can be realized by investing in firms characterized by different levels of social and
environmental performance. Overall volatility conditions of the financial markets are shown to
play a moderating role in the nature and strength of the CSP-risk relationship.
This study investigates the financial effects of additions to and deletions from two of the most ... more This study investigates the financial effects of additions to and deletions from two of the most well-known social stock indices: the Calvert social index and the MSCI KLD 400 index. By examining not only short-term abnormal returns but also trading activity, earnings per share and long-term performance of stocks that are involved in these events, we are able to shed new light on the characteristics of the “social index effect”. We find that the addition of a stock to either index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns of approximately -1.5% in the short run that can reach -14% six months after the event. Trading volumes for deleted stocks are significantly increased on the event date and operational performance of the respective firms deteriorates after their deletion from the social index. These findings are consistent with the asymmetric financial effects of corporate social performance that are connected to social index re-compositions.
We investigate the relationship between corporate and country sustainability on the cost of bank ... more We investigate the relationship between corporate and country sustainability on the cost of
bank loans. We look into 470 loan agreements signed between 2005 and 2012 with borrowers
based on 28 different countries across the world and operating in all major industries. Our
principal findings reveal that country sustainability related to both social and environmental
frameworks has a statistically and economically impactful effect on direct financing of economic
activity. An increase of one unit in country sustainability scores is associated with an average
decrease in the costs of debt by 64 basis points. Our analysis shows that the environmental
dimension of a country’s institutional framework is approximately two times as impactful as the
societal dimension when it comes to determining the cost of corporate loans. On the other
hand, we find no conclusive evidence that firm-level sustainability influences the interest rates
charged to borrowing firms by banks.
This study investigates the differential impact that various dimensions of corporate social perfo... more This study investigates the differential impact that various dimensions of corporate social
performance have on the pricing of corporate debt as well as the assessment of the credit
quality of specific bond issues. The empirical analysis, based on an extensive longitudinal
dataset, suggests that overall, good performance is rewarded and corporate social
transgressions are penalised through lower and higher corporate bond yield spreads
respectively. Similar conclusions can be drawn when focusing on either the bond rating
assigned to a specific debt issue or the probability of it being considered to be an asset of
speculative grade. Additional investigation shows that these relationships are more
pronounced for bonds with higher maturities and those issues assigned with either high or
very low ratings.