What drives a firm's ES performance? Evidence from stock returns

Mark Shackleton, Jiali Yan and Yaqiong Yao

Journal of Banking & Finance, 2022, vol. 136, issue C

Abstract: This study empirically explores the dynamic relation between the environmental and social (ES) performance of a firm and its stock market returns. We find robust evidence that worse stock market performance increases firms’ efforts on ES activities. Specifically, firms are more likely to improve their product and diversity performance and enhance their ES strengths rather than reduce ES concerns after poor stock market performance. This finding that poor stock market performance precedes enhanced ES performance is present (i) in firms with more financial slack, (ii) in firms with higher customer awareness, (iii) during the post-financial crisis period, and (iv) when a firm's shareholder activism on ES issues is intense. Our results underscore the importance of stock market performance in corporate ES decisions.

Keywords: ES performance; Stock market performance; Corporate governance (search for similar items in EconPapers)
JEL-codes: G12 G23 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:136:y:2022:i:c:s0378426621002569

DOI: 10.1016/j.jbankfin.2021.106304

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