The empirical results show that ESG performance is positively associated with cumulative abnormal returns during the COVID-19 pandemic. We use the Chinese listed company data as the bases for adopting an event-study method to identify the impact of ESG performance on cumulative abnormal returns. Therefore, the goal of this paper is to fill in this research gap. However, only a few studies have indicated the specific role of ESG performance in crisis periods. Moreover, we are motivated to question how ESG effects vary along with different products and firms during public crises. This result leads to a compromise opinion that the role of ESG generally depends on exposure to crisis shocks. The current study shows that stock prices are empirically tested for negative shocks during the COVID-19 pandemic in some products and firms but not in others (Al-Awadhi et al., 2020 Shen et al., 2020). In the first few months of 2020, the sudden market-wide financial crisis was triggered in response to the emerging global health crisis (i.e., COVID-19), the consequences of which were more severe than those of the Great Depression in 1929–1933 and the global financial crisis in 2007/2008 (Broadstock et al., 2021). Henke ( 2016) demonstrated that high-ESG-rated funds outperformed low-ESG-rated funds during the crisis, further supporting the view that investors place intrinsic value on ESG investments. Erragraguy and Revelli ( 2015) showed that the adoption of ESG standards by firms during the crisis increased transparency, mitigated information asymmetries, and improved stock market liquidity and quality. ( 2010) noted that the root causes of the current economic crisis could be moderated by a global transparency and accountability system and a public reporting of ESG performance.
( 2021) showed that high-ESG portfolios typically outperform low-ESG portfolios, thereby mitigating financial risks during financial crises.Īlthough there is limited research on the specific role of ESG performance during times of crisis, some insights have been gained from the 2008–2009 global financial crisis. ( 2020) developed a theoretical framework to show that stocks with high ESG ratings have significantly higher returns, lower return volatilities, and higher trading volumes than other stocks. ( 2021) obtained empirical evidence that ESG engagement reduces firms’ downside risks and their exposure to downside risk factors. However, emerging studies have supported the view that ESG-themed investments have low downside risks and are minimally volatile in price during turbulent times. ( 2021) determined that ESG performance facilitates the accumulation of intangible assets but does not serve as protection against downside risk. They also found no evidence that high-sustainability funds outperform low-sustainability funds. Hartzmark and Sussman ( 2019) found that investors make positive predictions on sustainable assets, steering money away from funds with low portfolio sustainability ratings to those with high ratings. Some studies on ESG investing have focused on the application of returns and risk management.
NAMELY STOCK SERIES
Subsequently, a series of studies have expanded on the preceding literature. ( 2008) concluded that existing studies hint, but do not explicitly demonstrate, that ethical investors are willing to accept sub-optimal financial performance to pursue social or ethical objectives. Second, ESG investments are increasingly recognized as improving the performance of managed portfolios, reducing portfolio risks, and increasing returns (Albuquerque et al., 2020 Díaz et al., 2021 Broadstock et al., 2021).Įarly literature on ESG investing has been partially inspired by studies of the eminent economist Milton Friedman (Friedman, 2007), who argued that ESG practices constitute a misallocation and misappropriation of valuable corporate resources. First, by focusing on ESG investments, ethical investment practices are actively promoted (Baldini et al., 2018 Broadstock et al., 2021). Investors are interested in ESG investments for at least two reasons (Renneboog et al., 2008). Given the COVID-19 pandemic, the necessity of ESG investing has been highlighted again (Demers et al., 2021 Manabe and Nakagawa, 2022). ESG investing is an investment process that integrates ESG considerations into investment decisions (Mǎnescu, 2011). In recent years, environmental, social, and governance (ESG) investments, frequently called ethical or sustainable investments, have rapidly increased globally (Galbreath, 2013).
0 kommentar(er)
