Introduction Part Essay Example | Topics and Well Written Essays - 1500 words

Introduction Part - Essay Example Over the last two decades, the different rating agencies have focussed on developing innovative methodologies for evaluation of social performance of the companies. The evaluation is important as the non-financial performance of the companies like corporate social responsibility reflects the strategic policies of the company gives an insight of the future course of action and business of the companies. Undertaking corporate social responsibility leads to spread of information in the market that the company is looking to maintain a stable environment and reduce the damages caused to the society as an effect of its operations. Thus the information flow to the market gives an understanding of the long term plans and sustainability of the companies. As a result of this flow of information, the decision of the market investors, suppliers, creditors, customers would vary in terms of entering into a relationship with the company. The activities of corporate social responsibility also pass t he information on the profitability, retained earnings, capability to engage in non-financial performance. ... All these information and subsequent effects in investment decisions of the stakeholders create an impact of the prices of stocks and shares of the companies (Celliera and Chollet, 2010, p.1). The stock prices would fluctuate in anticipation of good financial health and sustainability of the companies in long run which would be interpreted from the information derived out of their social performance. Thus the stock prices of the companies carry an important relationship with the company’s social responsibility. Rational for the research The announcements and disclosure of corporate social responsibility has shown a proportional impact on the stock prices of the companies over the years. The degree of social performance delivered by the companies could be understood from the ratings on corporate social responsibility. The rational of this research is to find significance of corporate social responsibility by interpreting the effects of CSR ratings on the stock prices of the com panies. A company rated highly on its social performance would give rise to investor reactions and these reactions would influence the investment decisions. Through research, the change in prices of the stock could be compared to the change in responsibility on social actions performed by the companies. The effect on stock prices could be determined to check whether the changes in stock price are directly proportional to the increase or decrease in social performance. Social performance may also be viewed by some sections of the investor as not contributing to maximization of their financial wealth in the long run. The research would also serve to provide an understanding as to what percentage of investors