Corporate Governance, ESG, and Stock Returns around the World

46 Pages Posted: 12 Nov 2018 Last revised: 29 Nov 2018

See all articles by Mozaffar Khan

Mozaffar Khan

Causeway Capital Management, LLC

Date Written: November 1, 2018


Non-financial performance measures, such as Environmental, Social, and Governance (“ESG”) measures, are potentially leading indicators of firms’ financial performance. Investor interest in ESG and its relation with future stock returns has increased recently. We draw on the prior academic literature in corporate governance and ESG to construct new corporate governance and ESG metrics. We then compare the return predictability of the new metrics to that of off-the-shelf metrics from a leading ratings provider. The new governance and ESG metrics, in contrast to the off-the-shelf metrics, display statistically and economically significant alpha in a global investable universe.

Keywords: Corporate governance, ESG, Stock returns, Global equities

JEL Classification: G11, G12, G15, G30, G34, M41

Suggested Citation

Khan, Mozaffar, Corporate Governance, ESG, and Stock Returns around the World (November 1, 2018). Available at SSRN: or

Mozaffar Khan (Contact Author)

Causeway Capital Management, LLC

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