Systematic ESG exposure and stock returns: Evidence from the United States during the 1991–2019 period

Aymen Karoui and Duc Khuong Nguyen

Business Ethics, the Environment & Responsibility, 2022, vol. 31, issue 3, 604-619

Abstract: Using a sample of US stocks over the period 1991–2019, we test whether stocks with high exposure to a social index exhibit high returns. Using a univariate analysis, our in‐sample results show that stocks with high sensitivities to the MSCI KLD 400 Social Index underperform stocks with low sensitivities by an annual risk‐adjusted performance of 7.02%. The negative premium is also larger in the post‐crisis period of 2007–2019 and is equal to 10.25%. The out‐of‐sample results offer, however, only weak evidence of such a finding, with a risk‐adjusted performance difference of merely −0.84% over the full sample period and no significant differences between the pre‐crisis and post‐crisis periods. In the multivariate regression, we find evidence of a negative relationship between exposure to the social index and stock performance. Moreover, we find that stocks with high exposure to the social index display a low corporate social responsibility score, a high Tobin’s Q, high long‐term debt, a large size, high total risk, a high market beta, a high SMB coefficient, a low HML coefficient, and a small MOM coefficient.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/beer.12429

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:buseth:v:31:y:2022:i:3:p:604-619

Access Statistics for this article

More articles in Business Ethics, the Environment & Responsibility from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().