Do Woke Firms Go Broke? Part 2

Questions in Finance

Do Woke Firms Go Broke? Part 2

In this episode of 'Questions in Finance,' university professors Kate Holland and Veljko Fotak delve into the 'S' (social) aspect of ESG (Environmental, Social, and Governance) in corporate social responsibility. They discuss the concept of 'double bottom line' companies that care about both operating profits and social responsibility, highlighting various facets of social responsibility including gender equality, parental leave policies, and worker safety. The hosts review academic studies on these topics, explore the impact of corporate scandals on reputation and valuation, and debate the performance of anti-woke funds. The episode concludes with a hopeful message that socially responsible firms do not underperform, illustrating that firms can be good corporate citizens without sacrificing profitability.

Timeline:

00:00 Do Double-Bottom-Line Firms Bottom Out?

01:36 Welcome

02:14 Defining "Social"

03:18 Labor-Friendly Policies, Equity, and Firm Value

09:58 Causality and the Maslow-Fotak-Holland Hierarchy of Corporate Needs

25:33 Corporate Scandals and Social Reputation

31:54 The Cost of Murder

44:42 Anti-Woke Funds

53:43 Not all Customers and Investors are Alike

57:54 Wrapping Up - A Note of Optimism

Bibliography:

Ahern, Kenneth R., and Amy K. Dittmar. "The changing of the boards: The impact on firm valuation of mandated female board representation." The Quarterly Journal of Economics 127, no. 1 (2012): 137-197.

Cohn, Jonathan, B. and Malcom I. Wardlaw. "Financing constraints and workplace safety." The Journal of Finance 71, no. 5 (2016); 2017-2058.

Eckbo, B. Espen, Knut Nygaard, and Karin S. Thorburn. "Valuation effects of Norway’s board gender-quota law revisited." Management Science 68, no. 6 (2022): 4112-4134.

Edmans, Alex. "The link between job satisfaction and firm value, with implications for corporate social responsibility." Academy of Management Perspectives 26, no. 4 (2012): 1-19.

Fauver, Larry, Michael B. McDonald, and Alvaro G. Taboada. "Does it pay to treat employees well? International evidence on the value of employee-friendly culture." Journal of Corporate Finance 50 (2018): 84-108.

Fotak, Veljko, Kateryna Holland, Vishal Sharma. "The cost of murder: Shareholder response to a social reputation shock." Working Paper.

Friede, Gunnar, Timo Busch, and Alexander Bassen. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies." Journal of Sustainable Finance & Investment 5, no. 4 (2015): 210-233.

Knittel, Christopher R., and Victor Stango. "Celebrity endorsements, firm value, and reputation risk: Evidence from the Tiger Woods scandal." Management Science 60, no. 1 (2014): 21-37.

Gertsberg, Marina, Johanna Mollerstrom, and Michaela Pagel. "Gender quotas and support for women in board elections." Working Paper.

Lins, Karl V., Lukas Roth, Henri Servaes, and Ann Tamayo. "Sexism, culture, and firm value: Evidence from the Harvey Weinstein scandal and the #MeToo movement." Journal of Accounting Research, (2024), forthcoming

Liu, Tim, Christos Makridis, Paige Ouimet, and Elena Simintzi. "The distribution of non-wage benefits: Maternity benefits and gender diversity." Review of Financial Studies, 36, (2023): 194-234.

Sonnenfeld, Jeffrey, Steven Tian, Steven Zaslavsky, Yash Bhansali, and Ryan Vakil. "It pays for companies to leave Russia." Working Paper.

Online Sources and Media:

Amrith Ramkumar, Amit (2022), "Anti-ESG activist investor urges Chevron to increase oil production, Wall Street Journal, September 6, 2022."

https://www.wsj.com/articles/anti-esg-activist-investor-urges-chevron-to-increase-oil-production-11662494769

Rajogpal, Shivaram, "Does The Anti-Woke MAGA ETF Inadvertently Make The Case For ESG?" Forbes, October 3, 2022.

https://www.forbes.com/sites/shivaramrajgopal/2022/10/03/does-the-anti-woke-maga-etf-inadvertently-make-the-case-for-esg/

Soundtrack:

The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.