The value of Saints and the price of Sin

• We estimate the proportion of firm value that is attributable to CSR initiatives
• For firms followed by sell-side analysts, the Saint premium is $5.77 (19.2%) and the Sinner discount is $3.91 (32.1%).
• The evidence supports the notion CSR creates shareholder value.
• Practices contrary to social norms destroy value.

Using firms in the MSCI KLD 400 as exemplars of virtuous firms (the “Saints”), and firms in the “Triumvirate of Sin” – alcohol, tobacco and gaming – we utilize a modification of the Feltham and Ohlson (1995) valuation model and quantile regressions to estimate “Saint premiums” and “Sinner discounts”. For firms followed by sell-side analysts, the Saint premium is, on average, $5.77 (a 19.2% premium over the share price) and the Sinner discount is, on average, $3.91 (a discount of 32.1% of the share price). The evidence supports the notion that CSR creates shareholder value. Practices contrary to social norms destroy value.