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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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    Cited by:

    1. Luo, Di & Farag, Hisham, 2024. "ESG and aggregate disagreement," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    2. Song, Jiayi, 2024. "Corporate ESG performance and human capital investment efficiency," Finance Research Letters, Elsevier, vol. 62(PB).
    3. Vu, Thanh Nam & Junttila, Juha-Pekka & Lehkonen, Heikki, 2024. "ESG news and long-run stock returns," Finance Research Letters, Elsevier, vol. 60(C).
    4. Seok, Sangik & Cho, Hoon & Ryu, Doojin, 2024. "Dual effects of investor sentiment and uncertainty in financial markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 300-315.
    5. Bang, Jeongseok & Ryu, Doojin, 2024. "ESG factors and the cross-section of expected stock returns: A LASSO-based approach," Finance Research Letters, Elsevier, vol. 65(C).

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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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