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Understanding how ESG-focused airlines reduce the impact of the COVID-19 pandemic on stock returns

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  • Chen, Chun-Da
  • Su, Ching-Hui (Joan)
  • Chen, Ming-Hsiang

Abstract

Incorporating environmental-social-governance (ESG) into a company's operations is an innovation strategy for contemporary businesses and a countermeasure for airline companies under COVID-19's influence. This research employs an autoregressive jump intensity trend (ARJI-trend) model to analyze the effects of COVID-19 and ESG ratings on the stock performance of the U.S. airline industry. We find that the ARJI-trend model captures the short- and long-run impacts of COVID-19 and ESG on stock return dynamics. Moreover, short-run stock return volatility converges to the original equilibrium level faster when a company has a higher ESG score, implying that promoting ESG does offer a defense mechanism to airline companies and that ESG performance is suitable for integration into business operational goals. The results lay the groundwork for understanding how an ESG focus might help airline companies to suffer less of an economic/financial impact during crises such as the COVID-19 pandemic.

Suggested Citation

  • Chen, Chun-Da & Su, Ching-Hui (Joan) & Chen, Ming-Hsiang, 2022. "Understanding how ESG-focused airlines reduce the impact of the COVID-19 pandemic on stock returns," Journal of Air Transport Management, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:jaitra:v:102:y:2022:i:c:s0969699722000503
    DOI: 10.1016/j.jairtraman.2022.102229
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    Citations

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    Cited by:

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    2. Ioannis Passas & Konstantina Ragazou & Eleni Zafeiriou & Alexandros Garefalakis & Constantin Zopounidis, 2022. "ESG Controversies: A Quantitative and Qualitative Analysis for the Sociopolitical Determinants in EU Firms," Sustainability, MDPI, vol. 14(19), pages 1-17, October.
    3. Yan Zhang & Zihan Xin & Guoya Gan, 2024. "Evaluating the Sustainable Development Performance of China’s International Commercial Ports Based on Environmental, Social and Governance Elements," Sustainability, MDPI, vol. 16(10), pages 1-16, May.
    4. Cássio Zanatto & Margarida Catalão‐Lopes & Joaquim P. Pina & Inês Carrilho‐Nunes, 2023. "The impact of ESG news on the volatility of the Portuguese stock market—Does it change during recessions?," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 5821-5832, December.
    5. repec:fst:rfsisf:v:8:y:2023:i:special-june_2023:p:166-180 is not listed on IDEAS
    6. Hamzeh F. Assous, 2022. "Saudi Green Banks and Stock Return Volatility: GLE Algorithm and Neural Network Models," Economies, MDPI, vol. 10(10), pages 1-18, October.
    7. Cai, Yifei & Zhang, Yahua & Wu, Yanrui & Chang, Tsangyao, 2024. "Airline stock market performance and political relations: A cross-quantilogram analysis of Chinese and US carriers," Transport Policy, Elsevier, vol. 155(C), pages 124-149.
    8. Gum-Kwang Bae & Sang-Mook Lee & Bui-Kim Luan, 2023. "The Impact of ESG on Brand Trust and Word of Mouth in Food and Beverage Companies: Focusing on Jeju Island Tourists," Sustainability, MDPI, vol. 15(3), pages 1-14, January.
    9. Yin Shi & Xiaoni Li & Maher Asal, 2023. "Impact of sustainability on financial distress in the air transport industry: the moderating effect of Asia–Pacific," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-23, December.
    10. Ștefan Rusu & Marcel Ioan Boloș & Marius Leordeanu, 2023. "K-means and agglomerative hierarchical clustering analysis of esg scores, yearly variations, and stock returns: insights from the energy sector in Europe and the United States," Journal of Financial Studies, Institute of Financial Studies, vol. 14(8), pages 166-180, June.
    11. Masao Tsujimoto, 2024. "Airlines’ Corporate Growth and Environmental Conservation: Evidence from Global Carriers and Forwarders," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 260-280, May.
    12. Lu, Xiaomeng & Zhang, Xianjun & Guo, Fusen & Li, Feng, 2024. "Evaluating ESG Investment Profitability: From the Perspective of Sophistication in Investment Decision-Making," Finance Research Letters, Elsevier, vol. 69(PA).
    13. Riccardo Savio & Edoardo D’Andrassi & Francesca Ventimiglia, 2023. "A Systematic Literature Review on ESG during the COVID-19 Pandemic," Sustainability, MDPI, vol. 15(3), pages 1-17, January.

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    More about this item

    Keywords

    Environmental-social-governance; ESG; Risk management; Autoregressive jump intensity trend model; COVID-19;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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