Spinning gold: The financial returns to stakeholder engagement

• Published in: Strategic management journal Vol. 35; no. 12; pp. 1727 - 1748
• Main Authors: Henisz, Witold J., Dorobantu, Sinziana, Nartey, Lite J.
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01.12.2014; John Wiley & Sons; Wiley Periodicals Inc
• Subjects: Business entities; Business valuation; Capital market; Capital returns; Corporate social responsibility; Corporate strategies; Financial management; Gold mines; Gold mines & mining; Gold mining; instrumental stakeholder theory; international business; Investors; Management theory; Net present value; Panel data; political risk; Rates of return; shareholder value; Shareholders; Social responsibility; Stakeholder; Stakeholders; Studies; Valuation
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.2180

We provide direct empirical evidence in support of instrumental stakeholder theory's argument that increasing stakeholder support enhances the financial valuation of a firm, holding constant the objective valuation of the physical assets under its control We undertake this analysis using panel data on 26 gold mines owned by 19 publicly traded firms over the period 1993-2008. We code over 50,000 stakeholder events from media reports to develop an index of the degree of stakeholder conflict/cooperation for these mines. By incorporating this index in a market capitalization analysis, we reduce the discount placed by financial markets on the net present value of the physical assets controlled by these firms from 72 percent to between 37 and 13percent.