臺大管理論叢 NTU Management Review VOL.30 NO.2

269 NTU Management Review Vol. 30 No. 2 Aug. 2020 environment, human rights, and product performance, including approximately 80 qualitative indicators. The KLD STATS database provides each dimension’s indicators, including both strengths and concerns, which provide comprehensive measures for overall CSR performance. In addition, iShares Exchange Traded Funds (ETFs) also use MSCI ESG Indices developed by KLD to select ETFs (e.g., iShares MSCI USA ESG Select ETF and iShares MSCI KLD 400 Social ETF) because the indices are composed of socially responsible US companies and provide access to a broad range of stocks that have positive ESG characteristics. Hence, the KLD STATS database is considered to be the best single source for social and environmental performance data (Graves and Waddock, 1994) and is been widely used by academics (Sharfman, 1996; Dhaliwal et al . , 2011). 3.2 Measuring Liquidity Risk Pástor and Stambaugh (2003) extend Fama and French (1993) three-factor model by including a market liquidity factor: r i , t = β 0 i + β L i L t + β M i MKT t + β S i SMB t + β H i HML t + ε i , t , where r i , t is asset i’s excess return in month t, and MKT , SMB , and HML are the Fama and French (1993) risk factors. MKT is the excess return on the market. SMB stands for “small minus big”, which is the average return on the three small portfolios minus the average return on the three big portfolios (market capitalization). HML stands for “high minus low”, which is the average return on the two value portfolios minus the average return on the two growth portfolios (book-to-market ratio), while L is the market liquidity factor in month t. A higher β L indicates higher liquidity risk, and a higher β M indicates higher market beta. Acharya and Pedersen (2005) consider the illiquidity cost to extend the standard CAPM, resulting in a liquidity-adjusted version of the CAPM. Through this extended CAPM, they define four risk factors. Three factors are liquidity risk factors, and the other is a market risk factor. In order to investigate the effect of CSR on the three liquidity risk factors ( cov ( R i , L m ), cov ( L i , R m ), and cov ( L i , L m )) and market beta ( cov ( R i , R m )), we define the first liquidity risk ( cov ( R i , L m )) as the covariation between a security’s return and the market liquidity. We expect that CSR performance affects cov ( R i , L m ) negatively because superior CSR performance leads to a higher return on an asset in times of market illiquidity. Empirical support for this effect is provided by Lins, Servaes, and Tamayo