ESG, liquidity, and stock returns

Di Luo

Journal of International Financial Markets, Institutions and Money, 2022, vol. 78, issue C

Abstract: We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.

Keywords: ESG; Stock returns; Liquidity (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:78:y:2022:i:c:s104244312200018x

DOI: 10.1016/j.intfin.2022.101526

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