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ISSN: 2306-3483 (Online), 2071-8330 (Print)

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Linkage between company scores and stock returns

Vol. 10, No 4, 2017


Saban Celik


Department of Business Administration, Katip Celebi University




Linkage between company scores and stock returns


Bora Aktan


Department of Economics & Finance, University of Bahrain

Kingdom of Bahrain

Manuela Tvaronaviciene


Department of Business Technologies & Entrepreneurship, 

Vilnius Gediminas Technical University


Pelin Bengitoz


Department of International Trade and Finance, Yasar University






Abstract. Previous studies on company scores conducted at firm-level, generally concluded that there exists a positive relation between company scores and stock returns. Motivated by these studies, this study examines the relationship between company scores (Corporate Governance Score, Economic Score, Environmental Score, and Social Score) and stock returns, both at portfolio-level analysis and firm-level cross-sectional regressions. In portfolio-level analysis, stocks are sorted based on each company scores and quintile portfolio are formed with different levels of company scores. Then, existence and significance of raw returns and risk-adjusted returns difference between portfolios with the extreme company scores (portfolio 10 and portfolio 1) is tested. In addition, firm-level cross-sectional regression is performed to examine the significance of company scores effects with control variables. While portfolio-level analysis results indicate that there is no significant relation between company scores and stock returns; firm-level analysis indicates that economic, environmental, and social scores have effect on stock returns, however, significance and direction of these effects change, depending on the included control variables in the cross-sectional regression.


Received: June, 2017

1st Revision: September, 2017

Accepted: October, 2017


DOI: 10.14254/2071-8330.2017/10-4/17


JEL ClassificationG11, G17, G30

Keywordscompany scores, corporate governance, economic, environmental, social, stock return