The impact of the Morningstar Sustainability Rating on mutual fund flows

Ammann, Manuel; Bauer, Christopher; Fischer, Sebastian; Müller, Philipp

doi:10.1111/eufm.12181

Cited by 89 publications

(34 citation statements)

References 35 publications

(63 reference statements)

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“…Recent research has revealed that firms with higher CSR scores experienced less volatility [71], as well as higher profitability, growth and sales per employee [36], during the financial crisis. Despite the fact that an increasing number of studies have supported the positive effect on firms' performance in an investment perspective, more and more portfolio managers and analysts have selected firms on the basis of CSR criteria [72,73] but have rarely adjusted their models based on ESG information. (Brzeszczyński and McIntosh [10] and Statman, Fisher and Anginer [38] report that investors are willing to sacrifice their investment returns if social benefits can be achieved through their investments.…”

Section: Discussionmentioning

confidence: 99%

Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

et al. 2020

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Academic research has shed light on the empirical relationships among a firm’s corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and firm performance and on the firm’s customer satisfaction–firm performance relationship in different markets. However, little notice has been taken of whether the coexistence of corporate social responsibility, corporate social irresponsibility and customer satisfaction has an interactive effect on firm performance. This study aims to examine the effects of their interaction on firm performance from an investment perspective. Using unbalanced panel regression to test a sample of publicly traded firms from the United States, this study finds that, in general, firms with higher customer satisfaction earn positive changes in abnormal stock returns. For firms that engage in CSR, CSR positively affects corporate performance, whereas firms’ social irresponsibility activities reduce firms’ financial performance. All else equal, a positive interactive effect of CSiR and customer satisfaction on stock return was observed. The results reveal that high customer satisfaction can alleviate the negative effect of corporate social irresponsibility on firms’ financial performance. Our findings will help management executives and investors to understand that the negative effect of a firm’s unforeseen events on firm performance can be weakened by increasing customer satisfaction.

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Section: Discussionmentioning

confidence: 99%

Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

et al. 2020

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“…The motivation would be the asymmetric relationship between flows and lagged performance (e.g., Chevalier and Ellison, 1997;Sirri and Tufano, 1998;Berk and Green, 2004) and the managers' perception that disclosed portfolios have a significant influence on calendar-based investments (e.g., Brown et al, 1996;Huang et al, 2007;Hu et al, 2011). 1 On the other hand, SRI fund managers could have other incentives and display a good ESG image because salient information on sustainability attracts money from investors who are more sensitive to ESG standards (e.g., Bollen, 2007;Riedl and Smeets, 2017;Ammann et al, 2019;Hartzmark and Sussman, 2019). These incentives could lead to different window dressing strategies in the SRI fund industry, not with the aim of disclosing a better financial image but to display a more sustainable image.…”

Section: Introductionmentioning

confidence: 99%

Ethical window dressing: SRI funds are as good as their word

Muñoz

Ortiz²,

Vicente³

2022

Finance Research Letters

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“…Previous literature has considered the effect of sustainability on performance by considering other scores defined prior to the LCD as the main variables. For instance, similarly to Ceccarelli, Ramelli, and Wagner (2019), Ammann, Bauer, Fischer, and Müller (2019) focused on the analysis of fund flows, finding that retail investors are sensitive to sustainability scores. Koellner, Weber, Fenchel, and Scholz (2005) address the boundaries of sustainability rating to identify best performing funds.…”

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confidence: 99%

Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy

et al. 2020

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Sustainable investment responds to demands for carbon and climate-neutral societies. To address the urgency around climate change and provide investors with more qualified information, Morningstar has developed the Low Carbon Designation (LCD) to indicate that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. The designation is given to portfolios that have low carbon risk and fossil fuel exposure scores. The present study builds on the LCD by examining the relationship between these scores and financial performance. With this aim, we analyze 3920 socially responsible mutual funds from across the world.Results show differences in financial performance according to scores and investment areas. We find evidence that funds considered to have higher levels of sustainability achieved better performance than funds with higher exposure to companies involved in carbon and fossil fuel industries. We provide insights on the informativeness of these new scores with a focus on climate change and their relevance in helping investors to identify climate-aware funds. This study highlights the importance of introducing strategies to develop green finance; the analysis confirms that sustainability improves performance. Finally, the LCD indicator is shown to be relevant for making fairer comparisons among socially responsible funds and, ultimately, for developing low-carbon economies.

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The impact of the Morningstar Sustainability Rating on mutual fund flows

Abstract: We examine the effect of

Cited by 89 publications

References 35 publications

Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

Ethical window dressing: SRI funds are as good as their word

Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy

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