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Emory Experts - Post-Financial Crisis: How Well do Mutual Fund Stocks Fare?

Following the global financial crisis in 2008, the assets of passively managed mutual funds have ballooned, while the market share of actively managed funds has fallen dramatically. Addressing this topic, a new research has been coauthored by Jeffrey “Jeff” Busse, professor of finance, and Goizueta alumni Kiseo Chung 17PhD, assistant professor of finance, Texas Tech University and Badrinath Kottimukkalur 17PhD, assistant professor of finance, George Washington University. In their paper, the researchers explain the shift in assets from actively managed funds to passive funds, “Impediments to Active Stock Selection and the Growth in Passive Fund Management. In 1999, Busse and his coauthors explain, the net assets of passive funds were “less than an eighth the assets of active funds.” But by the end of 2019, “the market share of passive equity funds increased to more than 50 percent,” Busse, Chung, and Kottimukkalur note. Passive funds track indices such as the S&P 500, Dow Jones Industrial Average, NASDAQ Composite, and Wilshire 5000—all indices that have been difficult to beat over the last decade. According to the Wall Street Journal, from 2008 to 2018, more than 80 percent of actively managed funds in the U.S. underperformed the S&P Composite 1500. This is in large part, the trio notes in their paper, because the so-called “FAANG” stocks—Facebook, Apple, Amazon, Netflix, and Google—comprise such a large part of these indices. In fact, the top 10 stocks in the S&P 500 currently make up around 30 percent of its market cap. “The market caps of these companies are huge, and they’ve done exceptionally well since the financial crisis,” Busse explains. Hence, active fund managers and their teams of analysts have found it much more challenging to discover undervalued and overlooked stocks with positive alphas ─ the stocks that outperform an index. “As such, a general move toward passively managed funds is not so surprising,” the paper reveals. Finding Diamonds and Avoiding Duds Making it even more difficult to find diamonds in the rough is a lack of volatility in the stock market. Except for some isolated periods, including the month or so around the start of the pandemic in March 2020, the market hasn’t experienced much volatility since 2008. Without wide swings in prices, fund managers have less opportunity to buy low and sell high. Over the same time period, aggregate stock liquidity has also been high, which means less chance for fund managers to pick up winners at bargain prices. “When there’s money in the market—when there’s liquidity—it means there aren’t a lot of disagreements on prices,” explains Busse. “Liquidity is inversely related to mispricing,” the researchers explain in their paper. This combination of circumstances—the rise of the FAANG stocks, the lack of market volatility, and higher liquidity—is making it much more difficult for actively managed funds to find stocks that will help their funds beat the indices, and therefore, outperform the passive funds. As a result, justifying their management fees gets more complicated. According to Thomson Reuters Lipper, the average expense ratio (management fees divided by total investment in a fund) for actively managed funds is 1.4 percent compared to 0.6 percent for the average passive fund—nearly three times as much. While active fund managers have realized that these higher costs are no longer paying off and have moved to reduce them, actively managed funds continue to lose market share. Market Share Gain of Passively Managed Funds While the authors weren’t surprised by the growth of passively managed funds, they were surprised by how much they grew. From 1999 to 2019, the authors note, the number of actively managed funds grew by 11 percent, while the number of passively managed funds increased by 244 percent. “There haven’t been any papers that try to explain why passive funds have gained so much market share,” says Busse. He and his coauthors believe their research illustrates that it’s in large part because the market, post-financial crisis, is challenging for stock pickers. “As such, it has been difficult for actively-managed funds to recoup the costs associated with active management, and compared to earlier periods, passively managed funds are better positioned to gain market share,” they explain. “As the payoffs to active management decrease, it becomes more difficult to justify the costs of active management, and, thus, we expect funds to decrease these costs given their negative performance implications.” Busse doesn’t believe the current fund management environment will continue indefinitely. When the pandemic knocked the S&P 500 down 30 percent in March 2020, managers did gain opportunities to find positive alpha stocks—which they bought. “It’s just, on average, over the last 10 years, there haven’t been enough of those opportunities,” explains Busse. “It’s a matter of hanging in there and, in some sense, keeping your investors from fleeing to passive funds until the environment is a little bit better.” Jeffrey Busse is the Goizueta Foundation Term Professor of Finance where his research focuses on investments, with an emphasis on mutual funds. Jeff is available to speak with the media regarding this important topic – simply click on his icon now to arrange an interview today.

Aston University makes experts available through COP26

The University’s website is highlighting its experts, projects and research, latest news and podcasts around sustainability On 4 November the University’s Supergen Hub will co-host a ‘fishbowl’ conversation to develop and interrogate visions for a net zero energy future Aston Originals has produced three shows around finance, energy and transport ahead of the summit. Aston University has launched its COP26 campaign to highlight the work being done by its academics and researchers to support the United Nation’s biggest climate change targets. The University’s website will highlight its experts, projects and research, latest news and podcasts around sustainability and climate change. The COP26 summit will be attended by the countries that signed the United Nations Framework Convention on Climate Change (UNFCCC) – a treaty that came into force in 1994. More than 190 world leaders will meet in Glasgow, between 31 October and 12 November, to discuss ways of achieving net-zero carbon emissions by 2050 and keeping the global temperature rise to 1.5 degrees Celsius this century. High profile attendees are expected to include Greta Thunberg, Pope Francis and Sir David Attenborough. Representatives from Aston University will also be taking part at the global summit. On 4 November during ‘Energy Day’, the six UK Research and Innovation Supergen Hubs, one of which involves academics from Aston University, are hosting a ‘fishbowl’ conversation with the public, to develop and interrogate visions for a net zero energy future. It will be participant-driven, enabling multiple perspectives to be aired and offering an opportunity for a variety of participants to engage, and will be live-streamed for those who cannot attend in-person (tickets available for the live-stream here). Also during Energy Day at COP26, the Aston University Supergen Bioenergy Hub will be hosting a ‘Build your own biorefinery’ game on the COP26 Universities Network exhibition stand within the Green Zone. Members of the public will be invited to create their own biorefinery (where multiple products are created from one feedstock to extract maximum value), demonstrating the many routes to producing bioenergy and bioproducts and the co-benefits that can be achieved through different choices. The campaign will also look at the huge carbon footprint of asthma inhalers and a new project which aims to redesign the canisters, so they are more environmentally friendly. The University’s new digital content brand, Aston Originals, has produced three videos showcasing its experts under the topics of finance, energy and transport. Professor Simon Green, pro-vice chancellor research at Aston University, said: "COP26 highlights how big a challenge the climate crisis is for everyone around the world. “I am proud of the work being done at Aston University to combat the problems facing the planet – from the researchers in the College of Engineering and Physical Sciences carrying out world-leading research into new and innovative ways of converting biomass into sources of sustainable energy to experts in the College of Business and Social Sciences who are helping small and medium sized enterprises (SMEs) cut their carbon footprint.”

ChristianaCare Named a “Most Wired” Health Care Technology Leader for 6th Consecutive Year

ChristianaCare Recognized as one of the Nation’s Best in Both Ambulatory and Hospital Care (WILMINGTON, Del. – Oct. 29, 2021) For the sixth consecutive year, ChristianaCare has earned the “Most Wired” designation from the College of Healthcare Information Management Executives (CHIME), which assesses how effectively health care organizations apply core and advanced technologies to improve health and care in their communities. ChristianaCare was recognized with a Performance Excellence Award for Most Wired’s acute and ambulatory categories. That level is reserved only for organizations that are considered leaders in health care technology who “actively push the industry forward.” The recognition affirms that not only has ChristianaCare implemented advanced technologies, but it leverages those technologies in innovative ways. And it also has encouraged deep adoption of these technologies across the entire health system. “Throughout the COVID-19 pandemic, patients and providers have experienced the power of virtual care and the ability for data and technology to improve the health care experience,” said ChristianaCare President and CEO Janice E. Nevin, M.D., MPH. “At ChristianaCare, we believe now is the moment to transform our health care system to a new model of care that doesn’t stop between appointments—it’s continuous, data-driven and technology-enabled. We’re proud to be recognized as a leader in health care innovation, as we work to achieve better health at lower costs.” “We are driving digital into the core of our existing operations and simultaneously creating new digital product offerings,” said Randy Gaboriault, MS, MBA, chief digital and information officer at ChristianaCare. “The concept of the visit as the primary point of interaction between patient and doctor is obsolete. Our unique care foundation is continuous, digital and in the home, driving care with data and producing engagement actions between the visits. Our goal is for the care team, supported by artificial intelligence within the workflow, to determine the next best action for each patient.” The recognition is the latest accolade that highlights ChristianaCare’s success in creating exceptional experiences for its patients and consumers through personalized, proactive communication, which enables people to use the channels that they prefer in order to easily access care. This success was recently illustrated through ChristianaCare’s integration of clinical data with its new customer relationship management (CRM) system, which enabled ChristianaCare to scale and automate outreach to patients due for important preventive health checks. Through this effort and the new capabilities, ChristianaCare initiated patient and consumer outreach to address two common gaps in care – annual wellness checkups and breast cancer screenings. Continuous and automatic, the outreach within weeks resolved 11% of the gaps in annual wellness checkups, and 8% of the gaps in breast cancer screenings. “Success here stems from our commitment to continuously look for opportunities to innovate, from which we can more quickly and effectively partner with each individual on their path toward optimal health, even as we explore new ways to push the boundaries of how technology can further improve the health of our community,” said Lynne McCone, vice president of IT Application Services at ChristianaCare. The 2021 Digital Health Most Wired program assessed the adoption, integration and impact of technologies in health care organizations at all stages of development, from early development to industry-leading. Each participating organization received a customized benchmarking report, an overall score and scores for individual levels in eight segments: infrastructure; security; business/disaster recovery; administrative/supply chain; analytics/data management; interoperability/population health; patient engagement; and clinical quality/safety. Participants can use the report and scores to identify strengths and opportunities for improvement. Participants also received certification based on their overall performance. “Digital transformation in healthcare has accelerated to an unprecedented level since 2020, and the next few years will bring a wave of innovation that empowers healthcare consumers and will astound the industry,” said CHIME President and CEO Russell P. Branzell. “The Digital Health Most Wired program recognizes the outstanding digital leaders who have paved the way for this imminent revolution in healthcare. Their trailblazing commitment to rapid transformation has set an example for the entire industry in how to pursue a leadership vision with determination, brilliant planning and courage to overcome all challenges.” About ChristianaCare Headquartered in Wilmington, Delaware, ChristianaCare is one of the country’s most dynamic health care organizations, centered on improving health outcomes, making high-quality care more accessible and lowering health care costs. ChristianaCare includes an extensive network of primary care and outpatient services, home health care, urgent care centers, three hospitals (1,299 beds), a freestanding emergency department, a Level I trauma center and a Level III neonatal intensive care unit, a comprehensive stroke center and regional centers of excellence in heart and vascular care, cancer care and women’s health. It also includes the pioneering Gene Editing Institute. ChristianaCare is nationally recognized as a great place to work, rated by Forbes as the 5th best health system to work for in the United States and by IDG Computerworld as one of the nation’s Best Places to Work in IT. ChristianaCare is rated by HealthGrades as one of America’s 50 Best Hospitals and continually ranked among the nation’s best by Newsweek and other national quality ratings. ChristianaCare is a nonprofit teaching health system with more than 260 residents and fellows. With its groundbreaking Center for Virtual Health and a focus on population health and value-based care, ChristianaCare is shaping the future of health care.

Rochester's David Primo on how the wealth tax proposal will (or won't) work

“The ‘wealth tax’ that’s being proposed in the current budget is really a tax on unrealized capital gains, so the stock that you have not sold yet but which has seen gains would be taxed before it is sold,” says David Primo, the Ani and Mark Gabrellian Professor and an associate professor of political science and business administration at the University of Rochester. “It applies only to the ‘richest of the rich’ and many questions remain as to how the operational and Constitutional concerns of it will be addressed. This proposal is much different from traditional wealth taxes where the idea has been to assess the wealth of tax payers every year and have the wealthiest individuals pay a tax on their net worth.” Primo is available for interviews and can discuss the precedent that this current wealth tax would establish with regard to taxing stock investments; if this is the best approach to taxing the wealthiest Americans; if it would even generate enough tax dollars to make a difference with the federal government’s current spending obligations; and more.

What can America expect as supply chain issues leave the auto industry stuck in park?

America’s auto industry is slowing down – and this time the main source is not a matter of labor issues or a lack of customers. This time this crisis, like those plaguing so many other industries lies in the tangled web of supply chain issues that is challenging manufacturing, industries and economies across America and the continent. In the United States, the auto industry has been hit particularly hard. The nation’s largest automaker and the rest of the global auto industry have been sporadically shutting down plants since late last year due to the semiconductor shortage, which has cut supplies on dealer lots and driven new vehicle prices to record levels. To be sure, production still isn’t back to normal because some of the factories will only run on one shift per day. Phil Amsrud, senior principal analyst for IHS Markit who studies the chip market, said GM’s move is a good sign, but doesn’t signal the end of the chip shortage. “It’s just not a sign that the patient is through all the rough spots and it’s a matter of weeks before they’re released from the hospital,” he said. October 22 - Associated Press There has been a lot of coverage, and a lot of questions asked as to how this happened and what it will take to untangle the mess. And that’s where experts from Augusta can help with coverage. "There are several factors but the main themes are suppliers inability to react to the increased demand, and governmental policies and responses,” explains Dr. Mark Thompson an economist and expert regarding the industrial issues facing America. “When COVID initially hit, demand dropped considerably. As it relates to the shortage of computer chips, what do you think consumers were demanding during the early phase of COVID...computers, laptops, handheld devices, etc. Technology companies responded and chip manufacturers switch to produce these items. Now, as consumers demand for new cars pick up, there is a shortage of the chips necessary for new cars. As it relates to government intervention, the stimulus has also increased demand for various goods and services furthering the shortage." As for how long will it take for America to see the supply chain replenished? "Good guess,” says Thompson. "I would say that we should expect to continue to see these shortages through the rest of 2021 and part of the way in 2022." If you’re a journalist covering the ongoing supply-chain issues – then let our experts help with your stories. Dr. Mark Thompson is an economist with highly accomplished work in business conditions, risk analysis, energy and the healthcare industry. Dr. Thompson is available to speak with media regarding the economic and industrial issues facing America during this supply chain crisis - simply click on his icon now to arrange an interview today.

Companies Big and Small Can Benefit From a Clear Remote Work Strategy

As remote work evolves into a regular work mode that satisfies employment needs for both employer and employee, it is important for businesses to have a well-thought-out remote work strategy, says Timothy Golden, professor at Rensselaer Polytechnic Institute. Golden, who teaches in the Lally School of Management, believes that creating the right norms and expectations from the start provides an important boost for achieving success in remote work. “If these norms — informal and often unspoken expectations for how people should act and behave — are not set correctly right from the start, then remote work can be much more challenging than it needs to be,” Golden said. In many companies, creating a position of a Chief Remote Officer (CRO) — a position similar to a CFO or COO but with a focus on leading remote work programs — can be a step toward future stability. According to Golden, other aspects to consider range from methods of employee communication and performance assessments, to the compatibility of a combination of hybrid, in-person, and remote work modes in the framework of an organizational business model. Remote work and telecommuting have been the focus of Golden’s body of research for more than 20 years. He is available to discuss remote work strategies and other aspects of working from home from the business perspective as well as the viewpoint of the remote workers.

Supply Chain Disruption Continues Due to the Pandemic

During the pandemic, the global supply chain began experiencing major disruptions. Kathleen Iacocca, PhD, an associate professor of management and operations in the Villanova School of Business, says that this issue is currently more severe than at the beginning of COVID's spread. Per the professor, the supply chain relies on effective forecasting, inventory control and logistics of supply and demand. At the start of the pandemic, the supply and demand scale became off-balance due to panic purchasing. Today, one reason it's much worse is that the supply went down. "You can try and push supply back up, which is what President Biden is doing with having ports operating 24/7. [But] Costco or Target can make as many phone calls as they want to Hasbro asking for Barbies, and if they don't have them, they can't just wave a wand and get them," says Dr. Iacocca. One option, if there's an imbalance, is to push demand down. "As a retailer, you can raise prices. That will help bring the supply and demand into a balance until the logistics part can catch up," says Dr. Iacocca. "But that can lead to dangerous issues. The people that can afford things are going to continue buying product, and it will exaggerate the differences in socioeconomic status." Dr. Iacocca predicts, with the upcoming holiday season, supply will simply not be able to meet demand. "In a normal world, retailers can forecast and build up inventory. In the future, demand will continue to go up while the supply doesn't get any larger and will just increase the gap between the two." In the meantime, small businesses can expect challenges. "If there's a short supply of lumber, Home Depot can afford it more than Mom and Pop's Lumberyard. Raising prices are a risk for those that can't necessarily afford things, but also the small businesses," says Dr. Iacocca. Ultimately, Dr. Iacocca predicts that supply could catch up with demand by March (at the earliest), depending on two things: "First, that the labor force doesn't remain as is. If you're playing the game of catchup, you’re working overtime. Second, you’re counting on factories not shutting down again because of COVID. March is the assumption that you have the means—and you just need the time and a period where demand does not continue to go up."

Friends or enemies? Is there any solving the ancient secret that is Chinese diplomacy?

When it comes to trade, investment and trillions of dollars of opportunity for American companies – it would appear that China and the United States should be close-knit allies. However when it comes to military escalation, an emerging global bull and national security – China is also a country that the U.S. government is very concerned about. NPR recently got in touch with UMW Professor of Political Science and International Affairs Elizabeth Larus to lend her expertise when it comes to the politics of China. Elizabeth Larus, who teaches Chinese studies at the University of Mary Washington in Virginia, says any economic "de-coupling" between the U.S. and China will be very difficult. "You can't just say you're going to pick up your factory and move all your resources and have a consistent, reliable energy source and the shipping port to get your stuff out at a decent price, and the logistics. China has nailed that down," said Larus, the author of Politics and Society in Contemporary China. China's President Xi Jinping uses this as leverage, she noted. "One of the goals of this Xi Jinping regime is to make the world really reliant on China for its supply chain, but not to have China reliant on the rest of the world," she added. "So that makes it difficult for the businesses." Is there a way out of this downward spiral? "I do not see a de-escalation anytime soon," she said. October 08 - NPR There will be no easy or immediate solution to the hot-and-cold relationship between the United States and China. But if you are covering this ongoing story – then let our experts help with your questions and coverage. Dr. Elizabeth Larus is an expert in the politics of China. She is available to speak to media, simply click on her icon to arrange an interview today.

‘Boilerplate language’ is preventing non-professional investors from making sound decisions, new research finds

Aston University’s Dr Ozlem Arikan looked at the impact of the style of corporate information on investor decisions Companies arguably avoid being specific by using ‘boilerplate language’ to avoid negative reactions of the investors Dr Arikan’s research suggests that boilerplate information is not useful for investment decisions and investors lose trust in managers who use boilerplate language New research from Aston University has found boilerplate language used by managers is preventing their non-professional investors from making sound decisions. Dr Ozlem Arikan examined the impact of the style of corporate information on non-professional investor decisions. The term ‘boilerplate’ refers to standardised text, copy, documents, methods or procedures that may be used over again without making major changes to the original. In the context of risk disclosures as studied by Dr Arikan, boilerplate description of risks entails a generic list of risks that are common to all industry, rather than including details relating to risks specific to that entity. Regulators are concerned about generic disclosures which they label as boilerplate; they warn that disclosures which do not have enough details do not help investors to make sound decisions. An example of a boilerplate can be found in Google’s risk disclosure which cites social media companies as its main competitors without specifying Facebook, an obvious competitor to Google in terms of generating online advertising revenues. Dr Arikan found that although some investors are less likely to invest in a company when its disclosure is specific, this only happens when they had some knowledge about the issue disclosed. However, when the disclosed risk materialises, investors rate boilerplate managers as less credible than specific managers and are less likely to invest in these companies. Dr Ozlem Arikan, senior lecturer in accounting at Aston Business School, said: “My research suggests the Financial Reporting Council has been right all along about ‘boilerplate language’ preventing non-professional investors from making sound decisions, and it is not good for companies either. “When companies are evasive about their risks, they neither help themselves nor their investors. “Companies arguably avoid being specific to avoid negative reactions of the investors. For example, Google presumably avoids mentioning Facebook as it does not want to make Facebook’s threat to its business too explicit. However, my research suggests that companies do not necessarily avoid negative reactions by being boilerplate. “Regulators may wish to guide companies in how to make more specific disclosures, which are more useful to investors in their decision-making than their boilerplate counterparts. “Importantly boilerplate language does not give enough warnings to investors as those who read a boilerplate risk warning are more surprised when the risk materialises and they correct their previous decisions to a greater extent than investors who read the specific information” You can read the full paper, The effect of boilerplate language on nonprofessional investors’ judgments, HERE. You can find out more about Dr Arikan’s previous research HERE.

Corporate Social Responsibility Builds Investor Trust

There’s little doubt that corporate social responsibility (CSR) is a good thing for businesses. Whether it’s taking positive action on society, communities, the climate, or the planet, strong corporate citizenship tends to play well with the public, the media, and consumers alike. And that can translate into wins in terms of brand equity and reputation. What is perhaps less clear are the concrete business returns that ethical business practices may or may not generate. Or, whether doing the right thing can create value for firms beyond image, brand, and customer or employee engagement. To shed light on this, Goizueta Assistant Professor of Accounting Suhas A. Sridharan, has taken a rather novel approach. Together with colleagues from the universities of LUISS Guido Carli, Nazarbayev University, and IDC Herzliya, Sridharan has published a new study using measures of disclosure credibility to understand whether CSR builds investor trust and drives tangible benefits for corporations. Corporate Social Responsibility Does Reap Rewards “Disclosure credulity refers to how much your investors trust the information your organization provides – how much faith they have in your company’s ability to accurately convey opportunities for growth, and perhaps more critically, to navigate risk and uncertainty,” says Sridharan. “Because CSR and responsible business practices have a role in addressing a range of risks–from climate change and environmental factors to socio-economic or political uncertainty and the impact on supply chains, talent and so on–we reasoned CSR can impact investor trust and disclosure credibility. And disclosure credibility, in turn, can impact investor decision-making and business outcomes.” To study disclosure credibility, and capture shifts in investor sentiment towards firms, Sridharan and her colleagues decided to use the link between share prices and company earnings announcements–the public statements on profitability that firms are obliged to make over different periods. “Earnings announcements are among the most salient and recurring areas of corporate disclosure, and managers and investors pay very close attention to them,” Sridharan says. “Because of the nature of the information they contain, they have a direct link to security price discovery – the price that firms and investors will agree to buy and sell shares in the company. Simply put, earnings announcements can be used to examine how much investors value a firm.” As reports, earnings announcements are also highly complex and typically time-consuming to process. Because of this, Sridharan and her colleagues opted to look at just how quickly or slowly investors were reading announcements and responding to them – and how quickly or slowly stock prices were adjusting to reflect earnings news within a five-day window after earnings announcements, as well as a longer period to allow for potential overreaction or error. More Disclosure Credibility Equals Faster Results Sridharan explains, “The intuition we brought to the study was that the more investors trust a firm’s disclosures, the more efficient or faster they will be to process its earnings report; in other words, the more they will be likely to take the report on face value and less inclined to dig into the finer minutiae or question its findings.” Adopting this approach, she and her colleagues then compared and contrasted investor response to earnings reports from different firms, with greater or less involvement in CSR activities. In total, they looked at a large-scale sample of more than 19,000 annual earnings announcements from just under 3,000 U.S. firms over a 25-year period, between 1992 and 2017. Using Morgan Stanley Capital International environmental, social, and governance ratings, they were also able to determine the degree of firm-level CSR across their dataset during this period. Crunching the numbers, Sridharan and fellow researchers were able to arrive at a concrete conclusion: CSR measurably increases investor trust and disclosure credibility. “When we estimated our regression models, we found clear evidence that corporate social responsibility does indeed contribute to the average speed of price discovery around earnings announcements; and it does so positively. Our results reveal that CSR increases the speed with which stock prices incorporate earnings news. Breaking it right down, we see that a one unit increase in CSR activities corresponds to 1.96 percent increase in the average timeliness or efficiency of reported earnings.” In other words, investors are reacting more quickly and favorably to performance reports made by organizations with more demonstrated social responsibility. “We know that these types of announcements are lengthy and dense; they take time to process,” Sridharan says. “So, the intuition here is that when your firm plants a flag on responsibility and accountability, investors are more likely to take your disclosures at face value – they’re more likely to trust what you’re saying.” Organizations would do well to take this finding on board, says Sridharan; especially in today’s climate of high volatility and uncertainty. Having investors on board is critical in weathering the bad times along with the good, she adds, and CSR can be a game-changing tool in building that necessary trust. The Wild West of the Regulatory Landscape Sridharan’s paper also informs the regulatory landscape around corporate responsibility which is still in its infancy and which she likens to something of a “Wild West.” “The U.S. Securities and Exchange Commission (SEC) and other regulators are increasingly focused on improving the functioning of capital markets and understanding the role of CSR,” she says. “The SEC has included an examination of climate and ESG-related risks among its 2021 examination priorities which also underscores a growing investor interest in these issues. At the same time, research is showing that CSR can be misused or simply deployed to benefit managers looking to score reputational points with stakeholders–at the expense of shareholders. By demonstrating that investor perceptions of firms are materially shaped by firms’ CSR activities, our study highlights the importance of–and helps build the case for–monitoring and regulating firms’ CSR activities.” Suhas A. Sridharan is an Assistant Professor of Accounting at Emory University's Goizueta Business School. Sridharan studies investors' use of information to assess risk and resolve uncertainty, particularly around issues of political economy. She is available to speak with media about the importantance of CSR - simply click on her icon now to arrange an interview today.