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1 – 10 of 409
Book part
Publication date: 15 March 2022

Hong-Yi Chen, Chun-Huei Hsu and Sharon S. Yang

This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study, subsequently…

Abstract

This study develops an environment, social, and governance (ESG) momentum strategy by combining information about ESG scores and the momentum effect. This study, subsequently, applies the ESG momentum strategy to Taiwanese and Japanese stock markets and investigates the performance of the ESG momentum strategy in each market. Detailed comparisons of the ESG scores and ESG momentum performance between the two markets are conducted. The empirical results show that the ESG momentum strategy can obtain enhanced profits in the Taiwanese market, while the ESG momentum strategy cannot lead to substantial profits in the Japanese market. In addition, the ESG momentum effect in the Taiwanese market can last for three years after portfolio formation. In the Japanese market, the ESG contrarian strategy may deliver better profits than the ESG momentum strategy.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80117-313-1

Keywords

Article
Publication date: 5 May 2022

Paola de Vincentiis

Motivated by the increasing momentum of environmental, social and governance (ESG) investing, this research aims to test the impact of ESG-related news on stock returns, comparing…

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Abstract

Purpose

Motivated by the increasing momentum of environmental, social and governance (ESG) investing, this research aims to test the impact of ESG-related news on stock returns, comparing different geographical areas to check whether the cultural background makes any difference.

Design/methodology/approach

Using a classic event–study methodology, this study measures extra returns following the broadcast of positive or negative ordinary news concerning ESG issues using a panel of major international companies located in Europe, North America and the Asia-Pacific (APAC) region.

Findings

ESG news are interpreted differently in different geographical areas. In Europe, bad news matter more than good news and produce a negative price impact. In the USA, a mirror picture emerges: good news matter more than bad news and produce a negative price impact. In the APAC area, ESG news are no news and are not correlated to significant extra returns. This study also shows that ESG reputation plays an important role and affects the impact of news on equity returns.

Practical implications

Both managers and equity investors need to be aware of the potential magnitude and direction of stock market’s reactions to news concerning ESG matters, taking also into consideration the location of the firm and the moderating effect of ESG reputation. Sustainability cannot be ignored anymore and need to be included into information data set and decision-making processes.

Originality/value

This study adds to the current literature insights on how ESG-related news impact in different geographical contexts. This study finds that news of similar tone may produce divergent effect on stock returns according to the prevailing cultural and economic interpretation of sustainability investments.

Details

Qualitative Research in Financial Markets, vol. 15 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

Book part
Publication date: 4 April 2024

Hsing-Hua Chang, Chen-Hsin Lai, Kuen-Liang Lin and Shih-Kuei Lin

Factor investment is booming in global asset management, especially environmental, social, and governance (ESG), dividend yield, and volatility factors. In this chapter, we use…

Abstract

Factor investment is booming in global asset management, especially environmental, social, and governance (ESG), dividend yield, and volatility factors. In this chapter, we use data from the US securities market from 2003 to 2019 to predict dividends and volatility factors through machine learning and historical data–based methods. After that, we utilize particle swarm optimization to construct the Markowitz portfolio with limits on the number of assets and weight restrictions. The empirical results show that that the prediction ability using XGBoost is superior to the historical factor investment method. Moreover, the investment performance of our portfolio with ESG, high-yield, and low-volatility factors outperforms baseline methods, especially the S&P 500 ETF.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83753-865-2

Keywords

Book part
Publication date: 1 May 2023

Jui-Chuan Della Chang, Zhi-Yuan Feng, Wen-Gine Wang and Fang-Chi Tsao

Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified…

Abstract

Agency problems are more severe for multinational corporations (MNCs) and multinational enterprises compared to their domestic counterparts. As companies develop diversified operations, their managers face more challenges. An incentive compensation structure has been designed to align the benefits of managers with those of shareholders. Additionally, corporate social responsibility (CSR) has become increasingly crucial for companies. MNCs must gain the trust of more investors to improve their corporate reputation and financial performance. CSR enables MNCs with a high sense of social responsibility to expand their investor base, reduce perceived risks, and decrease information asymmetry. Our empirical findings reveal that Taiwanese MNCs can enhance their performance by implementing cash-based compensation and pursuing CSR activities.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-80382-401-7

Keywords

Article
Publication date: 22 October 2019

Lars Kaiser and Jan Welters

Existing empirical evidence on the impact of environmental, social and governance (ESG) integration on momentum portfolios is limited. The combination of the two is relevant given…

2249

Abstract

Purpose

Existing empirical evidence on the impact of environmental, social and governance (ESG) integration on momentum portfolios is limited. The combination of the two is relevant given the risk-mitigating effect of ESG criteria, as well as the existence of momentum crashes. As such, ESG might lend itself to reduce crash risk for momentum investors.

Design/methodology/approach

In this paper, the authors provide insight into the impact of an ESG-constrained investment universe on momentum returns. The overall investment universe is split into high and low ESG-rated segments to anylse the characteristics of momentum portfolios conditional on the ESG rating.

Findings

The authors document the existence of a momentum premium across European stocks and for a subset of high and lows ESG-rated stocks. However, absolute returns of momentum strategies are significantly lower if momentum strategies are pursued on a subset of high ESG stocks. Additionally, findings document a risk-mitigation effect of ESG for momentum portfolios with significantly lower returns for momentum portfolios based on low ESG stocks during periods of momentum crashes.

Originality/value

Research on momentum investing and the momentum premium is large and well established, yet many questions remain. A recent study by Daniel and Moskowitz (2016) has analyzed crash risk for momentum investors and identified periods of strong momentum crashes. On the other hand, the literature on ESG integration in standing investment approaches is still limited, but as demand for sustainable products is increasing, so is the demand for a better understanding of the impact of ESG integration. Consequently, the authors provide evidence on the benefits of ESG integration for momentum investors to reduce their exposure to momentum crash risk.

Details

The Journal of Risk Finance, vol. 20 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 14 September 2015

Emanuele Teti, Alberto Dell'Acqua, Leonardo L. Etro and Linda Benedetta Andreoletti

– The purpose of this paper is to assess the existence of a relationship between socially responsible behavior of companies and price trends of their stocks.

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Abstract

Purpose

The purpose of this paper is to assess the existence of a relationship between socially responsible behavior of companies and price trends of their stocks.

Design/methodology/approach

The analysis is conducted by empirically testing data of environmental, social and governance ratings of a sample of European firms between December 2005 and December 2010. A disaggregate analysis is also performed to infer whether a specific contribution of all the different factors that make a business socially responsible can be observed in the value generation process.

Findings

The results show that the application of a sustainable approach are successful in creating value, both to the investor and the issuer companies.

Research limitations/implications

Findings of this work are significant with respect to portfolio management, because they suggest, on one hand, the myopia of a short-term approach (short-termism), and on the other hand, the importance of sustainable investing.

Originality/value

This paper focusses on the integration that has led many international groups to explicitly include extra-financial risk factors in their decision-making processes, by applying the by the four-factor model on a brand new data set.

Details

Journal of Management Development, vol. 34 no. 9
Type: Research Article
ISSN: 0262-1711

Keywords

Article
Publication date: 5 January 2024

Carla Del Gesso and Rab Nawaz Lodhi

Environmental, social and governance (ESG) disclosure has gained momentum in corporate reporting. Addressing a research gap on the subject, this paper aims to explore the theories…

Abstract

Purpose

Environmental, social and governance (ESG) disclosure has gained momentum in corporate reporting. Addressing a research gap on the subject, this paper aims to explore the theories involved in ESG disclosure studies, thereby shedding light on the dominant theoretical approaches and emerging perspectives that inform this type of disclosure.

Design/methodology/approach

A systematic review of 142 selected accounting studies published up to June 2023 devoted to ESG – and corporate social responsibility (CSR) – disclosure was conducted. The theories underlying these studies were examined through a descriptive performance analysis complemented by a systematic qualitative text analysis using RStudio and QDA Miner software tools.

Findings

The study reveals that five dominant theories stand out among the overall 32 found: stakeholder theory first, followed by legitimacy, institutional, agency and signaling theories. Theories are often combined into an integrated theoretical framework. The findings also show an array of minor constructs – many of them unconventional – that offer fresh perspectives for studying ESG disclosure, such as upper echelons, stakeholder salience, cognitive cost and reputation theories, among others.

Originality/value

This paper provides an original literature contribution by offering a comprehensive overview of the mainstream and niche theoretical perspectives underpinning accounting studies focused on ESG disclosure, with a nuanced scope of discussion on the use of ESG/CSR terms.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 28 October 2022

Efe C. Caglar Cagli, Pinar Evrim Mandaci and Dilvin Taşkın

The purpose of this study is to examine the dynamic connectedness and volatility spillovers between commodities and corporations exhibiting the best environmental, social and…

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Abstract

Purpose

The purpose of this study is to examine the dynamic connectedness and volatility spillovers between commodities and corporations exhibiting the best environmental, social and governance (ESG) practices. In addition, the authors determine the optimal hedge ratios and portfolio weights for ESG and commodity investors and portfolio managers.

Design/methodology/approach

This study uses the novel frequency connectedness framework to point out volatility spillover between ESG indices covering the USA, developed and emerging markets and commodity indices, including energy (crude oil, natural gas and heating oil), industrial metals (aluminum, copper, zinc, nickel and lead) and precious metals (gold and silver) by using daily data between January 3, 2011 and May 26, 2021, covering significant socio-economic developments and the COVID-19 outbreak.

Findings

The results of this study suggest a total connectedness index at a mediocre level, mainly driven by the shocks creating uncertainty in the short term. And the results indicate that all ESG indices are net volatility transmitters, and all commodity indices other than crude oil and copper are net volatility receivers.

Practical implications

The results imply statistically significant hedging and portfolio diversification opportunities to investors and portfolio managers across the asset classes, proven by the hedging effectiveness analyses.

Social implications

This study provides implications for policymakers focusing on the risk of contagion among the commodity and ESG markets during turbulent periods to ensure international financial stability.

Originality/value

This study contributes to the existing literature by differentiating ESG portfolios as the USA, developed and developing markets and examining dynamic connectedness and volatility spillovers between ESG portfolios and commodities with a different technique. This study also contributes by considering COVID-19 outbreak.

Details

Sustainability Accounting, Management and Policy Journal, vol. 14 no. 5
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 17 July 2023

Dan Daugaard, Jing Jia and Zhongtian Li

This study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack…

Abstract

Purpose

This study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. This study, therefore, collates and reviews relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.

Design/methodology/approach

This study conducts a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilised to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information and (2) how the information is used in SRI.

Findings

The review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e. negative and positive screening, active ownership and integration). This study provides guidance on how to use this information in SRI and provides recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods and where data use needs to be extended into new strategies.

Originality/value

This review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. This work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, this review will provide much-needed guidance for a range of practitioners, including investors and regulators.

Open Access
Article
Publication date: 25 August 2022

Anastasia Giakoumelou, Antonio Salvi, Giorgio Stefano Bertinetti and Anna Paola Micheli

The authors compare two market collapse incidents, focusing on their role as turning points for ESG considerations among investors that do not fall under the SRI class. The…

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Abstract

Purpose

The authors compare two market collapse incidents, focusing on their role as turning points for ESG considerations among investors that do not fall under the SRI class. The authors draw from the signaling theory to posit that ESG performance acts as a buffer to retain institutional shareholders under stress conditions.

Design/methodology/approach

The authors collect extensive data on institutional shareholdings and corporate performance during the pandemic and the 2008 financial crisis to examine the potential of ESG to act as a downward risk hedging mechanism. The authors test whether superior ESG scores function as insurance and resilience signals that lock investors in through times of high probability of divestments.

Findings

Findings indicate that ESG weighs in investment decisions during economic downturn and poor returns. The nature of this positive relationship is not static but dynamic contingent on overall risk materiality considerations.

Research limitations/implications

The authors update regulators, firms, investors and academics on ESG, risk and crisis management. The shifting materiality and the altering impact of ESG practices is our core implication, as well as limitation, in terms of metrics, temporal evolution and interaction with institutional factors, along with portfolio alpha and safe haven potential in ESG asset classes.

Originality/value

The authors extend current literature focusing on portfolio returns and firm valuations to highlight the role of ESG in shareholder retention during poor return periods. The authors further add to existing studies by examining the shifting materiality of ESG pillars during different crisis settings.

Details

Management Decision, vol. 60 no. 10
Type: Research Article
ISSN: 0025-1747

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