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ESG controversy as a potential asset-pricing factor

Author

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  • Bang, Jeongseok
  • Ryu, Doojin
  • Webb, Robert I.

Abstract

We examine whether ESG and ESG controversy scores are pricing factors that systemically affect the risk-return relationship of stocks. We test their additional explanatory power after controlling for other well-known risk factors. ESG controversy risk factor explains the cross-section of stock market returns. Investors exposed to ESG controversies demand a risk premium whereas ESG risk is regarded as idiosyncratic.

Suggested Citation

  • Bang, Jeongseok & Ryu, Doojin & Webb, Robert I., 2023. "ESG controversy as a potential asset-pricing factor," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006876
    DOI: 10.1016/j.frl.2023.104315
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    References listed on IDEAS

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    1. Guanhao Feng & Stefano Giglio & Dacheng Xiu, 2020. "Taming the Factor Zoo: A Test of New Factors," Journal of Finance, American Finance Association, vol. 75(3), pages 1327-1370, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asset pricing; ESG; ESG controversy; Risk factor; Risk premium;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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