4 receive Moskowitz Prize for SRI-capital cost paper

The Center for Responsible Business at University of California Berkeley’s Haas School of Business awarded the 2011 Moskowitz Prize for Socially Responsible Investing to four academics for their study on the cost of equity capital financing of firms with strong corporate responsibility.

Sadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok and Dev Mishra received the award Monday, the only global honor recognizing outstanding quantitative research in the field of sustainable and responsible investing, for their study, “Does Corporate Social Responsibility Affect the Cost of Capital.”

The paper examines the effect of corporate social responsibility activities on firms’ implied cost of equity capital, and argues that low CSR firms suffer from higher cost of equity than high CSR firms because of smaller investor base and higher perceived risks.

The study shows the market has now taken account of social factors in managing social portfolios, Lloyd Kurtz, Moskowitz Prize administrator and chief investment officer at Nelson Capital Management, said in an interview.

“Today, social environmental factors are in the valuations of stocks to one degree or another,” Mr. Kurtz said. “They clearly matter now in analyses of how much a stock is worth.”

Mr. El Ghoul is an associate professor at the University of Alberta; Mr. Guedhami is a Moore Research Fellow and associate professor at the Moore School of Business at the University of South Carolina; Mr. Kwok is a Senior Distinguished Moore Fellow and professor of international business at the Moore School of Business; and Mr. Mishra is an associate professor and Centre for Strategic Financial Management Scholar at the University of Saskatchewan.

The prize was awarded at the 22nd annual SRI in the Rockies Conference in New Orleans on Monday.

The Moskowitz Prize is named for Milton Moskowitz, one of the first researchers to publish comparisons of the financial performance of SRI screened and unscreened portfolios.