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

Mithilesh Gidage, Shilpa Bhide, Rajesh Pahurkar and Ashutosh Kolte ()
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Mithilesh Gidage: Department of Management Sciences (PUMBA), Savitribai Phule Pune University, Ganeshkhind, Pune 411007, Maharashtra, India
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

JRFM, 2024, vol. 17, issue 9, 1-28

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.

Keywords: ESG performance; systemic risk; firm size; cost of debt; firm age; systemic risk sensitivity; Capital Asset Pricing Model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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