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ESG Performance of Multinational Companies and Stock Price Crash: Evidence from Korea

Author

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  • Lee, Jeong Hwan

    (College of Economics and Finance, Hanyang University, Republic of Korea)

  • Cho, Jin Hyung

    (College of Economics and Finance, Hanyang University, Republic of Korea)

  • Kim, Bong Joon

    (College of Economics and Finance, Hanyang University, Republic of Korea)

Abstract

Our research focuses on the relationship between the ESG performance of South Korean multinational companies and stock price crash in next year. For our study, we divide samples into three different categories - namely, all companies, multinational companies (MNC) and non-multinational companies(non-MNC). Our major findings are as following. First, we find the negative relationship between the social (S) score of multinational companies and future price crash, indicating that their social performance prevents price crash risk. Second, when individual ESG performance is considered, there exists negative relationship between environmental (E) and social (S) score, and future price crash for multinational companies. Lastly, we find negative relationship between the ESG score and future price crash, which is due to the high environmental (E) and social (S) score of MNCs, which, in turn, raise each respective score for all companies, which has high correlation with their ESG scores. In this research, focusing on features of ESG on price crash in Korean MNCs, we identify the mitigating effect of social (S) factor for the MNC, which is in consistence with previous researches.

Suggested Citation

  • Lee, Jeong Hwan & Cho, Jin Hyung & Kim, Bong Joon, 2022. "ESG Performance of Multinational Companies and Stock Price Crash: Evidence from Korea," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 37(3), pages 523-539.
    • Handle: RePEc:ris:integr:0858
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    Keywords

    ESG; Multinational Companies; Korea; Stock Price Crash;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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