Can ESG controversies predict medium- to long-term stock performance? Evidence from global markets
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School of Business |
Bachelor's thesis
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Authors
Date
2021
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
19 + 6
Series
Abstract
I study the relationship between CSR media publicity, measured by changes in companies' ESG Con- troversies Score, and medium- to long-term stock performance. Using a global dataset between 2004 and 2020, I find that a portfolio of companies with improving ESG public image generates risk-adjusted excess returns of up to 0.4% per month. However, betting against firms with deteriorating ESG public image overweighs the positive returns, the effect being most notable in non-developed markets. The results are robust over time, but the performance of low ESG performers seems to be driven by large firms whereas the opposite is found for high ESG performers. In addition, I show that “offsetting ESG”, meaning improving ESG performance as means of compensating for past low performance, seems to be more valued than improving ESG performance overall.Description
Thesis advisor
Keloharju, MattiKeywords
ESG, corporate social responsibility, ESG controversies, excess returns