Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 376: Stock returns in relation to environmental, social and governance performance: mispricing or compensation for risk?

Cristiana Manescu ()
Additional contact information
Cristiana Manescu: Center for Finance, School of Business, Economics and Law, University of Gothenburg, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: Using detailed data on seven environmental, social and governance (ESG) attributes for a long panel of large publicly traded U.S. rms during July 1992-June 2008, this study nds that only the community indicator has a positive impact on stock returns and furthermore this e ect is due to mispricing. Additionally, we document a changing e ect of employee relations from positive to negative between July 1992- June 2003 and July 2003- June 2008. The positive impact is found to be due to mispricing, but for the negative impact there is some weak evidence that it is compensation for low non-sustainability risk. A negative impact of human rights and product safety indicators on stock returns in the more recent period has also been found to be due to mispricing. The implications of this study are that certain ESG issues (employee relations in particular) could be priced as risk factors as soon as there is higher information availability for those ESG attributes.

Keywords: responsible investments; risk factor test; market efficiency; four factor model

JEL-codes: G12; G14; M14

37 pages, First version: September 1, 2009. Revised: March 1, 2010.

Full text files

20998 HTML file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Ann-Christin Räätäri Nyström ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:11:22.