Spinning Gold: the Financial Returns to External Stakeholder Engagement

Witold Henisz (The Wharton School)
Sinziana Dorobantu (The Wharton School)
Lite Nartey (The Wharton School)

Abstract: We provide direct empirical evidence in support of instrumental stakeholder theory‚Äüs argument that increasing cooperation and reducing conflict with stakeholders 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 cooperation or conflict 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 gold controlled by these firms from 72 to 9 percent.

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