We examine whether corporate social responsibility (CSR) creates value for seasoned equity issuers. Using a sample of seasoned equity offerings (SEOs) by U.S. companies between 2004 and 2013, we find a positive association between CSR performance and the stock price reaction to SEO announcements. Surprisingly, however, further tests reveal that seasoned equity issuers with high CSR scores tend to have higher post-SEO increases in cash holdings, and lower investments in real assets, than issuers with low CSR scores. Moreover, high-CSR issuers have worse post-SEO operating and stock price performance than low-CSR issuers. Together, our findings suggest that high CSR scores mislead shareholders into attributing value-increasing motives to seasoned equity issues.

One caveat of current literature on the value of active management is the lack of treatment for the performance measures that can be gamed. We propose to use the performance measure that can’t be manipulated with respect to the underlying distribution, time variation, nor estimation error, (the manipulation-proof performance measure (MPPM, Goetzmann et al. (2007)), to rank all active U.S. domestic equity mutual funds from 1980 to 2013 on a quarterly basis to analyze managerial skills. We find fund managers in the higher ranked persistently outperform lower ranked managers by posting higher gross and net fund returns, higher holding-based returns, and generating positive return gap. Analyzing the holdings of the portfolios indicates higher ranked managers hold stocks with higher information asymmetry, especially the growth companies that are younger, smaller, and with lower liquidity. Our results show that the spread on gross and net fund returns between highest ranked and the lowest ranked fund managers is between 49 and 52 basis points per month. The holding returns are statistically significant for up to six months indicating the stock picking skills exist for those higher ranked managers. Even though MPPM identifies managerial skills, the positive alphas may not be warranted due to their operating expenses.