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The Impact of a Company's ESG Profile on Equity Value and Risk

In: Exploring ESG Challenges and Opportunities: Navigating Towards a Better Future

Author

Listed:
  • Greta Keliuotytė-Staniulėnienė
  • Joana Mačėnaitė

Abstract

Purpose: This study quantitatively assesses the impact of ESG profile on equity value and risk, as well as identifies potential differences occurring in different sectors, based on the data of the Nasdaq Nordic market. Methodology: To reach this purpose, (i) the stock return and volatility analysis is being conducted (using the methods of paired sample t-test, correlation, etc.), and (ii) panel data models with constant, fixed and random effects are being constructed. The analysis is based not only on the company’s ESG performance but also on a cross-sectoral approach. Findings: The results revealed that although ESG factors appeared to have a significant impact in most of the constructed models, the impact of these factors varies depending on the sector. Implications: This research provides a comprehensive and comparative approach to the importance of the ESG profile for investment performance and therefore can be useful both for impact investors making investment decisions in dynamic global financial markets and for companies developing or reforming their ESG strategies. Limitations: Due to the problem of data availability, the cross-sectoral comparison was performed based on the limited number of sectors. In addition, the limited availability of ESG data in the analysed market did not allow the use of additional methods to assess the impact of ESG. Future Research: Expanding the data sample and assessing the impact of a company’s ESG profile not only in different sectors but also in different phases of the economic cycle might be the direction for future research.

Suggested Citation

  • Greta Keliuotytė-Staniulėnienė & Joana Mačėnaitė, 2024. "The Impact of a Company's ESG Profile on Equity Value and Risk," Contemporary Studies in Economic and Financial Analysis, in: Exploring ESG Challenges and Opportunities: Navigating Towards a Better Future, volume 116, pages 265-282, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:csefzz:s1569-375920240000116014
    DOI: 10.1108/S1569-375920240000116014
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    More about this item

    Keywords

    ESG profile; stock resilience; stock price factors; impact investing; quantitative methods; G11; G12; G3; Q56;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G3 - Financial Economics - - Corporate Finance and Governance
    • 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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