Measuring the Social Responsibility Discount for the Cost of Equity Capital: Evidence from Benefit Corporations

In 2010, Maryland became the first state to allow firms to incorporate as “benefit corporations,” which are for-profit entities with a social purpose. Since then, nineteen other states have followed. Using survey data from the population of 94 benefit corporations existent at the time of the survey, this paper directly measures the “social responsibility discount” – the degree to which investors in a benefit corporation have a lower required return on equity than they would have for traditional firms. This paper finds that the discount is approximately 35%. This paper also provides unique descriptive statistics about benefit corporations and their founders.