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Is Corporate Social Responsibility viewed as a risk factor? Evidence from an asset pricing analysis

Authors Cristiana Manescu
Publisher University of Gothenburg
Place of publication Göteborg
Publication year 2009
Published at Department of Economics
Language en
Keywords responsible investments, market efficiency, three factor model, risk premium
Subject categories Economics


Using detailed data on corporate social responsibility (CSR) for a long panel of large publicly traded U.S. firms during July 1992-June 2008, this study investigates whether an overall measure of CSR, aggregated over seven dimensions (community, corporate governance, diversity, employee relations, environment, human rights, and product safety), can explain variation in stock returns, using Fama and MacBeth (1973) month-by-month cross-sectional regressions approach. Risk- factor analysis indicates a shift in the effect of CSR, with a positive effect on stock returns during July 1992 - June 2003, and a negative effect during July 2003 - June 2008. These results are robust even after controlling for ten industry-specific effects. Analysis on the disaggregated CSR measures reveals that it is only the Community and Employee Relations dimensions generating the positive e ect of CSR on stock returns during 1992-2003. The negative effect during 2003-2008 was mainly generated by the Human Rights, Product Safety, and Employee Relations dimensions. This constitutes evidence that these three CSR dimensions function as risk factors.

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