The empirical findings indicate a positive relationship between ESG scores and stock returns.
Authors
Mahender Yadav, Department of Commerce, Maharshi Dayanand University, Rohtak, India.
Barkha Dhingra, Department of Commerce, Maharshi Dayanand University, Rohtak, India) (Shri Ram College of Commerce, University of Delhi, New Delhi, India.
Shallu Batra, Department of Commerce, Maharshi Dayanand University, Rohtak, Haryana, India.
Mohit Saini, Department of Commerce, Maharshi Dayanand University, Rohtak, Haryana, India.
Vaibhav Aggarwal, Associate Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India.
Summary
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.
Methodology
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.
Published in: International Journal of Social Economics
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