Performance of Stock Price with Changes in SRI Governance Index
Professor Lee Chang-won (School of Business)
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Professor Lee Chang-won (School of Business) recently presented his study on the performance of stock price with changes in socially responsible investment (SRI) governance index. Mainly looking at the different levels of performance that various corporations are achieving depending on their SRI, Lee has managed to publish his studies in the academic journal, "Corporate Social Responsibility and Environmental Management."
According to Lee, while the performance of a corporation was evaluated only on its actual profit in the past, the importance of fulfilling its social responsibility is gaining weight in its evaluation in order to achieve sustainable growth nowadays. With a trend of studying how to reflect social responsibility within the actual performance of a company, Lee has managed to find the correlations between the stock price of a corporation, which represents its performance, and its inclusion within the SRI governance index.
“It is those that are included in this SRI governance index that have managed to show a higher performance both in the short and long term,” stated Lee. Having to satisfy the various stakeholders within the company, it is mainly those that have managed to conduct such social actions that have seen an actual rise of their stock price, or in other words, shown high levels of performance. This is especially applicable to global corporations, as they have to satisfy the different levels of social actions that their more varied stakeholders require.
Socially responsible investment (SRI)
It was explained by Lee that the social responsibility of corporations varies across a number of fields, including those of environmental, economic and even those related to the governance structure of such companies. Presenting an example of environmental responsibility, he explained how corporations within the index focus upon issues, both internally and externally. Internally, the working environments of the workers are improved, whereas externally, environmental problems such as air pollution are tackled by the company.
The importance of such actions is becoming enhanced, especially when related to the sustainable growth of a corporation. Additional to the traditional financial index, the SRI is also becoming a significant metric for success. “It can be compared to today’s students. They are not only required to simply study hard during their school years but also to become skilled in order to adapt and succeed in the contemporary society. The same goes for companies, as they have to do more than simply make profit,” explained Lee.
The research and its future
With the importance of social responsibility for corporations gaining light, Lee believes that it is the highest level of management that should be mostly focused towards this trend. In order to become a corporation that successfully conducts business on the international level, it is crucial to be included within the SRI index and fulfill the levels of social responsibility that is being required in the current industry. Lee started his research in order to prove this correlation and arouse the attentions of domestic corporations, which put a heavy emphasis upon ‘owner leadership.’
Using the traditional event history analysis method, Lee focused upon the actual factors that had an impact upon a corporations’ stock price and compared the performance of those that are either included or excluded within the SRI governance index from 2003 to 2012. He was able to conclude the significance of the inclusion within the SRI index as being crucial, especially within the global business environment. This is due to the fact that it is not only the developed markets, but also the markets of developing countries that are placing a higher emphasis upon social responsibility.
Based on his research, Lee showed his hopes towards corporations showing a higher interest in social responsibility, becoming a company that goes from ‘Good to Great’ and that can show actual contributions towards a healthier society. He also added that the students of Hanyang should also become figures that are able to acknowledge and fulfill the responsibilities that the society requires, being able to carry out the school philosophy of ‘Love in Deed’ when they become the true leaders of society in the future.
Choi Seo-yong email@example.com
Photos by Park Guen-hyung
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