Under the CSR umbrella - The effect of CSR performance and Human capital commitments on Corporate financial performance

Sammanfattning: This study looks at the effect of corporate social responsibility (CSR) performance and human capital commitments on corporate financial performance for Swedish corporations between 2002 and 2015. While the general effect of CSR performance on corporate financial performance is well studied around the world, this study deep-dives into one factor under the CSR umbrella, human capital, which till this day is a sub-section of CSR that we know little about. A number of portfolios are constructed by ranking a selection of stocks on the Nasdaq Stockholm exchange based on their performance on scores related to CSR and human capital commitments. The returns of these portfolios are evaluated against the Carhart four-factor model and the portfolio analysis is complemented with an analysis of the return on equity and Tobin's Q of the firms included in the portfolios. Our overall findings indicate that there is no significant relationship between CSR performance/human capital commitments and corporate financial performance on the Swedish market. One exception is found when considering human capital commitments relating to training and development initiatives taken by firms in Sweden, where our findings indicate a negative relationship with long-run stock returns over the 14-year period considered in this study.