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

Greta Keliuotytė-Staniulėnienė and Joana Mačėnaitė

A chapter in Exploring ESG Challenges and Opportunities: Navigating Towards a Better Future, 2024, vol. 116, pp 265-282 from Emerald Group Publishing Limited

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.

Keywords: ESG profile; stock resilience; stock price factors; impact investing; quantitative methods; G11; G12; G3; Q56 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:csefzz:s1569-375920240000116014

DOI: 10.1108/S1569-375920240000116014

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