Stakeholder relations and stock returns: On errors in investors' expectations and learning

A. Borgers, J. Derwall, K. Koedijk, J. Ter Horst

Research output: Contribution to JournalArticleAcademicpeer-review


A significant number of institutional investors publicly state the belief that corporate stakeholder relations are associated with firm value in a manner that the financial market fails to understand. We investigate whether stakeholder information predicted risk-adjusted returns due to errors in investors' expectations and ultimately ceased to do so as attention for such information increased. We build a stakeholder-relations index (SI) for a wide range of U.S. firms over the period 1992-2009 and provide evidence that the SI explained errors in investors' expectations about firms' future earnings. The SI was positively associated with long-term risk-adjusted returns, earnings announcement returns, and errors in analysts' earnings forecasts over the period 1992-2004. However, as attention for stakeholder issues became more widespread, subsequently, these relationships diminished considerably. The results are consistent with the idea that increased investor attention for stakeholder issues eventually eliminates mispricing. © 2013 Elsevier B.V.
Original languageEnglish
Pages (from-to)159-175
JournalJournal of Empirical Finance
Publication statusPublished - Jun 2013
Externally publishedYes


Dive into the research topics of 'Stakeholder relations and stock returns: On errors in investors' expectations and learning'. Together they form a unique fingerprint.

Cite this