Reexamining Performance of Socially Responsible Firms

Abstract

This study reexamines the controversy surrounding “Doing well while doing well” debate within the investment literature. We retest whether investors who are dedicated to socially responsible investing will realize additional returns or will be penalized for their investment philosophy. We control for the size bias and sector concentration bias that were identified in previous studies. Our findings indicate that there is no difference in performance between the socially responsible firms and their conventional counterparts. The Investors who chose to invest in socially responsible firms will not earn additional return nor will be penalized. The findings also suggest that there is no difference in the performance of socially responsible and conventional firms over long periods versus short periods. Our findings also indicate that the constraints that are placed on an investment decision would lower or leave unchanged the maximum utility that an investor may obtain.