Brown Bag Seminar - Emanuele Rizzo (ESADE Business School)

We are pleased to welcome Emanuele Rizzo (ESADE Business School) as our speaker.

He will present his paper “Corporate Misconduct and the Capital Allocation of Prosocial Investors” (co-authored with Stefano Pegoraro and Rafael Zambrana, Mendoza College of Business, University of Notre Dame).

Abstract:

We show that the portfolio allocation of prosocial institutional investors contains forward-looking information about the risk of corporate misconduct among publicly traded firms. Because prosocial funds face significant investor outflows following enforcement actions against portfolio firms, they have incentives to screen firms based on anticipated legal exposure. We measure corporate misconduct using U.S. regulatory penalties and a novel dataset of civil litigation. We construct a stock-level measure that aggregates the portfolio tilts of prosocial funds relative to comparable conventional funds. This measure predicts a lower likelihood of future enforcement actions, even after controlling for ESG ratings, ESG-related news, and firms’ past legal histories. The predictive power is consistent with informed screening rather than shareholder engagement. Overall, our findings identify prosocial institutional investors as a novel source of private information about corporate misconduct risk.

The Brown Bag Seminar will take place on November 12, 2026, from 12:00 p.m. to 1:00 p.m. in Room D4.4.008.