Fishing the Corporate Social Responsibility risk factors

A typical argument in the literature is that Corporate Social Responsibility (CSR) reduces the risk of conflicts with stakeholders. In accordance to this, we test whether: (i) domain specific CSR portfolios present pricing anomalies that could be captured by the introduction of risk factors accounting for exposition to stakeholder risk, (ii) this risk source is priced in the cross-section of stock returns. In doing so we are particularly cautious in disentangling the contributions of different CSR domains in generating the pricing anomalies. Our findings show the existence of pricing anomalies related to CSR, which vary in numbers across all the domains under analysis. Even if our domain-specific CSR risk factors are not able to capture all pricing anomalies, we find that they reduce their absolute value. Additionally, our results show that the stakeholder risk is priced in the cross-section of returns, and that such additional risk source presents different premiums for each domain. (C) 2018 Published by Elsevier B.V.