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The Impact of ESG on Stock Performance - A Case Study of Developing and Developed Countries: South Africa and Sweden.

Okunade, Sarah LU (2021) NEKN02 20211
Department of Economics
Abstract
Following the increasing sustainability trend and awareness, investors now look beyond only financial considerations when purchasing stocks. This paper analyzes the relationship between Environmental, Social, Governance (ESG) scores and stock performance, measured by returns. It investigates if splitting the sample period would result in a different magnitude of abnormal returns. This study further contributes to the field by comparing the impact of ESG in developed and developing countries to determine better stock performance. ESG portfolios are constructed and regressed on both CAPM and Fama-French models. The results reveal positive abnormal returns when the high and low portfolios are considered individually but negative abnormal... (More)
Following the increasing sustainability trend and awareness, investors now look beyond only financial considerations when purchasing stocks. This paper analyzes the relationship between Environmental, Social, Governance (ESG) scores and stock performance, measured by returns. It investigates if splitting the sample period would result in a different magnitude of abnormal returns. This study further contributes to the field by comparing the impact of ESG in developed and developing countries to determine better stock performance. ESG portfolios are constructed and regressed on both CAPM and Fama-French models. The results reveal positive abnormal returns when the high and low portfolios are considered individually but negative abnormal returns when a high-minus-low strategy is applied, indicating a better stock performance with low ESG scores. When accounting for different time periods, the results show a mix of positive and negative abnormal returns, suggesting a difference in the direction and magnitude of returns in both periods. This result is consistent with the different regression models and countries. Finally, country comparison results show that developing countries’ stocks perform better than developed countries. (Less)
Please use this url to cite or link to this publication:
author
Okunade, Sarah LU
supervisor
organization
course
NEKN02 20211
year
type
H1 - Master's Degree (One Year)
subject
keywords
Sustainability · ESG · Returns · Sweden · South Africa
language
English
id
9055958
date added to LUP
2021-10-26 08:17:58
date last changed
2021-10-26 08:17:58
@misc{9055958,
  abstract     = {{Following the increasing sustainability trend and awareness, investors now look beyond only financial considerations when purchasing stocks. This paper analyzes the relationship between Environmental, Social, Governance (ESG) scores and stock performance, measured by returns. It investigates if splitting the sample period would result in a different magnitude of abnormal returns. This study further contributes to the field by comparing the impact of ESG in developed and developing countries to determine better stock performance. ESG portfolios are constructed and regressed on both CAPM and Fama-French models. The results reveal positive abnormal returns when the high and low portfolios are considered individually but negative abnormal returns when a high-minus-low strategy is applied, indicating a better stock performance with low ESG scores. When accounting for different time periods, the results show a mix of positive and negative abnormal returns, suggesting a difference in the direction and magnitude of returns in both periods. This result is consistent with the different regression models and countries. Finally, country comparison results show that developing countries’ stocks perform better than developed countries.}},
  author       = {{Okunade, Sarah}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Impact of ESG on Stock Performance - A Case Study of Developing and Developed Countries: South Africa and Sweden.}},
  year         = {{2021}},
}