Day 2: May 28, 2016 (Saturday)
Keynote Speaker: Harrison HongHarrison Hong is the John Scully ’66 Professor of Economics and Finance at Princeton University. He received his B.A. in economics and statistics with highest distinction from the University of California at Berkeley in 1992 and his Ph.D. in economics from M.I.T. in 1997. His work has covered diverse topics, including behavioral finance and market efficiency, agency and biased decisions, organizational diseconomies and performance, social interaction and investor behavior, and social responsibility and the stock market In 2009, he was awarded the Fischer Black Prize, given once every two years to the best American finance economist under the age of 40. He is a research associate at the National Bureau of Economic Research and currently an editor of the International Journal of Central Banking. He has been an associate editor at the Journal of Finance, Journal of Financial Intermediation and a Director of the American Finance Association.
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Keynote Speech Outline
A Socially Responsible Stock Market
I argue that incorporating the preferences of investors and corporate managers for socially responsible investments is fundamental to understanding the pricing and functioning of the stock market. By studying the pricing of sin stocks and the fines handed down by regulators for violations of the Foreign Corrupt Practices Act, I provide causal estimates of the value of corporate social responsibility (CSR). At the same time, I show that there is significant over-investment in CSR by using the unanticipated 2003 Dividend Tax Cut, which exogenously increased insider ownership and led to substantial valuation increases for companies that cut their CSR. Since CSR is a public good, such a socially responsible stock market also calls into question the dominant academic and regulatory view that corporate governance is unambiguously good at all cost.
I argue that incorporating the preferences of investors and corporate managers for socially responsible investments is fundamental to understanding the pricing and functioning of the stock market. By studying the pricing of sin stocks and the fines handed down by regulators for violations of the Foreign Corrupt Practices Act, I provide causal estimates of the value of corporate social responsibility (CSR). At the same time, I show that there is significant over-investment in CSR by using the unanticipated 2003 Dividend Tax Cut, which exogenously increased insider ownership and led to substantial valuation increases for companies that cut their CSR. Since CSR is a public good, such a socially responsible stock market also calls into question the dominant academic and regulatory view that corporate governance is unambiguously good at all cost.