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ESG and Stock Prices

Mansouryar, Soroor LU ; Larsson, Isabella LU and Larsson, Veronica LU (2022) IBUH19 20221
Department of Business Administration
Abstract
This paper examines the relationship between positive change in ESG scores and instantaneous stock price volatility as well as the direction of price change. For this purpose, a sample of 536 large- and medium cap companies within the EU market were selected and classified into three groups of excellent, good and poor-satisfactory performance based on their ESG scores. The change in the companies’ stock prices were studied within an event period of three days around the time when the ESG score was released by Reuters Refinitiv, which was compared to the estimated period of 100 days. Furthermore, the data was studied against the efficient-market hypothesis and signalling theory as the main theoretical framework and tested in SPSS through... (More)
This paper examines the relationship between positive change in ESG scores and instantaneous stock price volatility as well as the direction of price change. For this purpose, a sample of 536 large- and medium cap companies within the EU market were selected and classified into three groups of excellent, good and poor-satisfactory performance based on their ESG scores. The change in the companies’ stock prices were studied within an event period of three days around the time when the ESG score was released by Reuters Refinitiv, which was compared to the estimated period of 100 days. Furthermore, the data was studied against the efficient-market hypothesis and signalling theory as the main theoretical framework and tested in SPSS through contingency tables, ordinary least square regression and chi-square. Even though the final results did not indicate significant associations between the respective variables, slight differences in prediction lines for the categories were observed and further assessed. The study concluded that although some reactions to the signals were observed, they were considered minor; therefore, a short-term perspective on this topic would not capture the whole value investing in CSR could provide the company, such as decrease in volatility. That could benefit the company in terms of mitigating the risks arising from volatile business environments, hence a reason for why investing in CSR has far more benefits for the company than only a better reputation. (Less)
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author
Mansouryar, Soroor LU ; Larsson, Isabella LU and Larsson, Veronica LU
supervisor
organization
alternative title
A quantitative study on ESG score and its immediate effects on stock prices of mid -and large cap companies within the EU market
course
IBUH19 20221
year
type
M2 - Bachelor Degree
subject
keywords
Corporate Social Responsibility, ESG, Volatility, Efficient-Market Hypothesis, Stock Valuation
language
English
id
9082198
date added to LUP
2022-08-01 12:57:36
date last changed
2022-08-01 12:57:36
@misc{9082198,
  abstract     = {{This paper examines the relationship between positive change in ESG scores and instantaneous stock price volatility as well as the direction of price change. For this purpose, a sample of 536 large- and medium cap companies within the EU market were selected and classified into three groups of excellent, good and poor-satisfactory performance based on their ESG scores. The change in the companies’ stock prices were studied within an event period of three days around the time when the ESG score was released by Reuters Refinitiv, which was compared to the estimated period of 100 days. Furthermore, the data was studied against the efficient-market hypothesis and signalling theory as the main theoretical framework and tested in SPSS through contingency tables, ordinary least square regression and chi-square. Even though the final results did not indicate significant associations between the respective variables, slight differences in prediction lines for the categories were observed and further assessed. The study concluded that although some reactions to the signals were observed, they were considered minor; therefore, a short-term perspective on this topic would not capture the whole value investing in CSR could provide the company, such as decrease in volatility. That could benefit the company in terms of mitigating the risks arising from volatile business environments, hence a reason for why investing in CSR has far more benefits for the company than only a better reputation.}},
  author       = {{Mansouryar, Soroor and Larsson, Isabella and Larsson, Veronica}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{ESG and Stock Prices}},
  year         = {{2022}},
}