Chapter 7: The Dark Side of Ethics in Finance: Empirical Evidences From the Italian Market

In last decades,¹ the interest from the academic world toward the sustainable finance research field has experienced a strong growth.¹ In addition, renowned rating agencies have paid much attention to the formulation of innovative indicators capable of reporting the social responsibility of a company.

An increasing interest has been brought to the impact of corporate social responsibility (CSR) on economic and financial performance of listed companies. Many economists have abandoned the axioms of classical economics as self-regulation and market efficiency (Fama, 1970, 1976; Sen, 1988) recognizing the corrective function that CSR can have in a market less sustainable and characterized by strong information asymmetries (Moskowitz, 1972, 1975). The growing awareness developed by top managers towards the different categories of stakeholders has produced a positive impact on medium and long-term profitability of the managed entities. Such profitability is attributable to several factors whose nature and scope is not always grasped by the stock exchange market, namely variables that are not typical of technical or fundamental analysis. Hence, the investors’ myopia unable to detect such variables, has led some rating agencies to specialize in the formulation of indicators that express the degree of social and environmental responsibility of listed company’s decisions.