Value Relevance and Code of Ethics: an Empirical Analysis on Italian Listed Companies

The aim of this paper is to provide empirical evidence regarding the value relevance of Italian listed companies’ codes of ethics. The literature describes several studies investigating the value relevance of single non-financial ethic-related variables, but we cannot find any study aimed at examining the value relevance of codes of ethics and, therefore, this paper tries to fill this research gap. The main idea of this research is that a code of ethics, seen as a “summarisation” of ethical variables, might be value relevant in the same way as single ethic-related information. Our hypotheses state that codes of ethics may be value relevant: 1) if the first adoption of the code of ethics is value relevant and 2) if the quality of the code of ethics is value relevant. We tested our hypotheses on the first 100 companies listed on the Italian Stock Exchange, in the years 2002-2011. Empirical results show that our hypotheses are verified. The paper also provides insights for future research and further developments.