The next Joint Economic and Management Finance Seminar will take place on Friday 4 December from 11:30 to 13:00, Online.
Aya Nasreddine (University Paris Nanterre) will present “Corporate Social Responsibility as a Common Risk Factor” (co-writting with Souad Lajili and Marc Desban.

This article challenges factor models widely used to explain stock returns. For European firms involved in corporate social responsibility (CSR) actions, we find a risk premium associated with extra-financial ratings priced by the market (that is, environmental, social, and governance [ESG] ratings). This premium is calculated as the excess return of low-rated firms compared to high- rated firms. To describe rated firms’ returns, we propose a parsimonious two-factor model that includes both the market factor and this premium. Unlike the CAPM, three-, or five-factor models, our model is validated by the Gibbons, Ross and Shanken (1989) test. Our results lead to many managerial implications related to portfolio management, asset pricing, and corporate fi-nancial and investing decisions