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New research links CSR with stock price. Communication is a key factor.

Although it’s the newest in a long list of research projects attempting to link CSR and stock price, its prestigious provenance makes Professor CB Bhattacharya’s work worth pondering.

Those of us who have long theorized — and sought documentation — that corporate social responsibility (nee sustainable development, corporate citizenship etc.) can be sufficiently valued by investors to improve stock price, have new supporting empirical data.

Significantly, the new research, as reported in Ethical Performance, stresses the importance of strong CSR performance linked with effective communication: “New research offers proof that investment in, and subsequent reporting of, corporate social responsibility (CSR) improves a stock price.”

Suggesting long-term relevance, the research was based on a sample of Fortune 500 firms that released CSR reports between 2005 and 2011. It reports that significant cumulative absolute abnormal returns and significant cumulative abnormal trading volumes occur around the release dates of CSR reports.

Professor Bhattacharya E .ON is chair in Corporate Responsibility and Dean of International Relations at ESMT European School of Management and Technology. He contends that, “This research provides useful new information on an under-examined, yet critical stakeholder — investors. It shows that stock markets positively value the timely release of CSR reports helping to significantly¬† strengthen the case for CSR and lay to rest the argument that investors attach little value to CSR performance.”

The research potentially stretches the relevance of CSR beyond the “socially responsible investment” community to all investors — and to¬† members of all corporate boards in their fiduciary responsibility for good governance.