The impact of ESG performance on shareholder value during market turmoil caused by COVID-19

Abstract

The global economic downturn triggered by the ongoing coronavirus disease 2019 (COVID-19) has been reflected in stock markets around the world. This paper examines whether a sustainable use of resources, proxied by ESG scores, can contribute to share price resilience during the COVID-19 crisis. By also analysing the durability of earnings per share (EPS) analyst consensus forecasts during the first five months in 2020, a statement can be made on where potential differences in share price returns are originated. For the analysis I utilize a sample of S&P 500 firms in the USA, and control for industry affiliation, firm size, leverage, stock price volatility, and earnings surprises were utilized. I find that environmental activities positively affect actual and abnormal share price returns in the first period, from January 01, 2020 to March 23, 2020 . None of the other scores offer explanatory power for returns. In the recovery phase, from March to May, a negative link between ESG dimensions and stock price returns can be established. This finding, combined with the insight that generally no relationship can be determined between the ESG dimensions and EPS forecasts, leads to the conclusion that investors seem to attach greater importance to performance aspects like liquidity and short-term profitability during the turmoil.

Date of Award	26 Jan 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Fani Kalogirou (Supervisor)