Market reactions to the Swiss “Responsible Business Initiative” (RBI)

This study examines stock-market reactions to the legislative events associated with the Responsible Business Initiative (RBI), a proposed law that would have made Swiss firms legally liable for environmental violations and violations of human rights in their supply chains worldwide. It would have also obliged Swiss firms to implement due diligence and disclose non-financial information. The RBI was rejected in November 2020, since it did not achieve the necessary cantonal majority. We apply event-study analyses on stock-market reactions to examine a sample of 185 Swiss firms that are listed on the Swiss Performance Index (SPI) and would have been affected by the RBI, if it had become law. Our analyses show that market reactions to the legislative events relating to the RBI that were likely to introduce stricter sustainability legislation were negative and significant. Further analyses indicate that this effect is stronger for companies in sustainability-sensitive industries. We found no evidence that the market reacted positively to events that decreased this likelihood.