The effect of corporate social responsibility on portfolio performance: Evidence from Istanbul Stock Exchange

The purpose of this study is to examine the effect of Corporate Social Responsibility (CSR) performance on portfolio performance and to evaluate the performance of a trading strategy to be created by buying stocks with high CSR scores and selling stocks with low CSR scores. For this purpose, two portfolios with high and low CSR scores were created from the stocks traded in the Istanbul Stock Exchange (ISE) between 2009-2018. Then, we applied Capital Asset Pricing Model (CAPM), Three Factor Model (3FM), Four Factor Model (4FM), and Five Factor Model (5FM) to test whether there is any performance difference between the portfolios and to test if the difference is accounted by CSR scores for the period July 2010 and June 2020. The findings show that the alpha coefficients of portfolios with high and low CSR scores are generally positive and significant. This result shows that investors can achieve a superior performance compared to the market by investing in CSR portfolios. However, the alpha of the difference portfolio, which shows the difference between the performance of the two portfolios, is in most cases negative and insignificant. This result indicates that there is no significant difference between the performances of portfolios with high and low CSR scores.