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ESG scores and stock returns during COVID-19: an empirical analysis of an emerging market

Author

Listed:
  • Mahender Yadav
  • Barkha Dhingra
  • Shallu Batra
  • Mohit Saini
  • Vaibhav Aggarwal

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.

Suggested Citation

  • Mahender Yadav & Barkha Dhingra & Shallu Batra & Mohit Saini & Vaibhav Aggarwal, 2024. "ESG scores and stock returns during COVID-19: an empirical analysis of an emerging market," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 52(3), pages 390-405, June.
  • Handle: RePEc:eme:ijsepp:ijse-10-2023-0819
    DOI: 10.1108/IJSE-10-2023-0819
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    More about this item

    Keywords

    ESG; Stock return; India; Financial performance; COVID-19; UN SDG8; G10; G11; G38;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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