韩国裸舞

Vivian Fang

Professor of Finance
Indiana University

Does Corporate Purpose Conflict With Shareholder Returns?

Date: Friday, February 21, 2025
Time: 10:30 AM 鈥� 12:00 PM
Location: Bronfman building, Room 210

Abstract

This paper studies the link between purpose statements and future shareholder returns. We use deep neural networks to identify a 鈥減urpose statement鈥� as one that views stakeholder value as a means to ultimately improve shareholder value, in contrast to 鈥減urpose-like鈥� statements that put shareholders and stakeholders on an equal footing. A value-weighted portfolio of companies with purpose statements earns a 0.25% monthly alpha above characteristics benchmarks; a long-short portfolio that buys firms with purpose statements and sells those with purpose-like statements earns a 0.28% monthly alpha. These results are stronger for large firms, consistent with their greater latitude and pressure to invest in stakeholders even if inconsistent with shareholder value. Purpose statements are positively linked to future earnings surprises, suggesting a channel through which they lead to higher stock returns, but purpose-like statements are not. They are positively associated with unvested but not vested CEO equity ownership, suggesting that long-term equity more effectively aligns managers with shareholders鈥� long-term interests.

Note: The paper is coauthored with Alex Edmans at LBS and Lijun (Gillian) Lei at UNC-Greensboro. I would caution that we are still revising the paper so the abstract may change.