Leading or lagging indicators of risk? The informational content of extra-financial performance scores

Amos Sodjahin (), Claudia Champagne (), Frank Coggins () and Roland Gillet
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Amos Sodjahin: Université de Moncton and GReFA
Claudia Champagne: Université de Sherbrooke and GReFA
Frank Coggins: Université de Sherbrooke and GReFA

Journal of Asset Management, 2017, vol. 18, issue 5, No 2, 347-370

Abstract: Abstract This study investigates the informational content of extra-financial agency scoring by examining the relationship between firm beta and extra-financial performance score upgrades and downgrades. Specifically, we study the variations in the extra-financial score of 266 Canadian corporations between 2007 and 2012 with a conditional model. We find no evidence that changes in firm beta precede changes in extra-financial scores. Rather, our results suggest that a firm’s systematic risk increases following a downgrade of its extra-financial performance. In terms of score upgrades, the overall effect is not significant. However, score upgrades for firms with already-high scores predict higher systematic risk, while score upgrades for firms with low scores predict lower systematic risk. These results suggest that extra-financial scores are informational and can be useful to portfolio managers, notably for their risk management strategies.

Keywords: corporate social responsibility; extra-financial performance; informational content; systematic risk; conditional model; G10; G14; M14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41260-016-0039-y

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