Index Membership, Supply Chain, and Corporate Social Responsibility(2/2)

Project Details


In the MOST three-year project, I submit three proposals. In the first-year proposal, I will examine the long-run performance of additions to S&P 500 index and explore the causes. The market reactions to the announcement and short-run stock behaviors around the index reconstitutions have been well documented. However, a few studies examine the long-run performance of additions. Existing studies have confirmed that firms newly added to index constituents can increase institutional investor base, improve stock liquidity, and raise investors’ awareness; and thus lower cost of equity capital as a result. Thus, I propose that, in order to be included in the S&P 500 index, managers of public firms have incentives to manipulate the earnings. I will examine the extent of earnings management for additions around the index reconstitutions and investigate the association between earnings management and long-run operating and stock performance. In the second-year proposal, I will study the spillover of index effects by examining the market reactions and long-run performance of economically related firms in the supply-chain relationships with the additions. Existing literature has examined the stock and operating performance of additions and their rivals around the index reconstitutions. I propose that, if the reconstitutions can change the competitiveness of the additions and their rivals, the events should affect their dependent suppliers and customers as well. In the third-year proposal, I will examine the role of economically related firms on promoting environment and social performance of firms in 23 emerging markets. Existing literature has confirmed the monitoring role of institutional investors on promoting E&S performance. I propose that customers have social and economic incentives to monitor their dependent suppliers to implement better E&S performance. I expect that customers that come from high E&S norm countries would have a strong and significant positive impact on their dependent suppliers in emerging countries for their E&S performance.
Effective start/end date1/08/2131/07/22

UN Sustainable Development Goals

In 2015, UN member states agreed to 17 global Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all. This project contributes towards the following SDG(s):

  • SDG 8 - Decent Work and Economic Growth
  • SDG 12 - Responsible Consumption and Production
  • SDG 17 - Partnerships for the Goals


  • index reconstitutions
  • long-run performance
  • earnings manipulation
  • supply chain
  • ESG


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