ESG scores and stock returns during COVID-19: an empirical analysis of an emerging market
Abstract
Purpose
The COVID-19 pandemic resulted in a dramatic downturn in the global stock markets. Investors look for safe stocks that can provide better risk-adjusted returns. Stocks with higher Environmental, Social, and Governance (ESG) scores can be good choices for investors. This study focuses on this argument by examining the relationship between ESG indicators and stock returns while considering financial and macroeconomic variables.
Design/methodology/approach
In this study, 39 non-financial firms listed in Nifty-50, for which data is available, have been included. Panel data from 2018 to 2021 is collected to examine this relationship in the presence of COVID-19. Additionally, the panel regression method is used.
Findings
The empirical findings indicate a positive relationship between ESG scores and stock returns. This relationship holds even when the control variables like Return on Assets (ROA), Gross Domestic Product (GDP), Return on Equity (ROE), age, size, leverage of the firm, inflation, and crisis period are used in the model.
Originality/value
This study contributes by examining the linkage between ESG indicators and stock return while controlling the impact of the financial and macroeconomic variables in Indian markets, which has not been undertaken so far. Moreover, this is the first study to use the ESG score data of S&P Global, which gives more weight to the material factors of a firm.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2023-0819.
Keywords
Acknowledgements
The authors have presented the original draft at “ICSSR sponsored 8th Annual International Commerce Conference on Bharat @2047: Role of Commerce and Business on January 11 and 12, 2023 organized by Department of Commerce, Delhi School of Economics, University of Delhi”.
Funding: The present research received no specific grant from any of the funding agencies in public, private or non-profit sectors.
Conflict of interest: The authors declare that there is no conflict of interest.
Citation
Yadav, M., Dhingra, B., Batra, S., Saini, M. and Aggarwal, V. (2024), "ESG scores and stock returns during COVID-19: an empirical analysis of an emerging market", International Journal of Social Economics, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJSE-10-2023-0819
Publisher
:Emerald Publishing Limited
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