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ESG Performance and Systemic Risk Nexus: Role of Firm-Specific Factors in Indian Companies

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  • Mithilesh Gidage

    (Department of Management Sciences (PUMBA), Savitribai Phule Pune University, Ganeshkhind, Pune 411007, Maharashtra, India
    Fixed Income Engineering (FIDA), Morningstar Inc., 22 W. Washington St., Chicago, IL 60602, USA)

  • Shilpa Bhide

    (Department of Management Sciences (PUMBA), Savitribai Phule Pune University, Ganeshkhind, Pune 411007, Maharashtra, India)

  • Rajesh Pahurkar

    (Department of Management Sciences (PUMBA), Savitribai Phule Pune University, Ganeshkhind, Pune 411007, Maharashtra, India)

  • Ashutosh Kolte

    (Department of Management Sciences (PUMBA), Savitribai Phule Pune University, Ganeshkhind, Pune 411007, Maharashtra, India)

Abstract

This study investigates the ESG performance–systemic risk (SR) nexus among Indian companies. Using the beta coefficient from the Capital Asset Pricing Model (CAPM) and statistical analysis, it explores how ESG performance affects SR. The findings reveal that firms with higher ESG scores have lower SR sensitivity. Notably, there is a significant difference in risk sensitivity between high- and low-ESG-rated companies, with ESG effects being less pronounced in high-cap firms compared to low-cap firms. Conversely, large firms, older firms, and those with lower borrowing costs show a diminished effect of ESG ratings on their SR sensitivity. These results underscore the importance of firm-specific characteristics in determining the efficacy of ESG strategies in risk mitigation. This study reveals that ESG performance reduces SR, with market valuation affecting this relationship.

Suggested Citation

  • Mithilesh Gidage & Shilpa Bhide & Rajesh Pahurkar & Ashutosh Kolte, 2024. "ESG Performance and Systemic Risk Nexus: Role of Firm-Specific Factors in Indian Companies," JRFM, MDPI, vol. 17(9), pages 1-28, August.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:9:p:381-:d:1463520
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    References listed on IDEAS

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