What Drives a Firm's ES Performance?:Evidence from Stock Returns

Shackleton, Mark and Yan, Jiali and Yao, Yaqiong (2022) What Drives a Firm's ES Performance?:Evidence from Stock Returns. Journal of Banking and Finance, 136. ISSN 0378-4266

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This study empirically explores the dynamic relation between the environmental and social (ES) performance of a firm and its stock market returns. We find robust evidence that worse stock market performance increases firms’ efforts on ES activities. Specifically, firms are more likely to improve their product and diversity performance and enhance their ES strengths rather than reduce ES concerns after poor stock market performance. This finding that poor stock market performance precedes enhanced ES performance is present (i) in firms with more financial slack, (ii) in firms with higher customer awareness, (iii) during the post-financial crisis period, and (iv) when a firm's shareholder activism on ES issues is intense. Our results underscore the importance of stock market performance in corporate ES decisions.

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Journal Article
Journal or Publication Title:
Journal of Banking and Finance
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This is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 136, 2022 DOI: 10.1016/j.jbankfin.2021.106304
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13 Sep 2021 12:05
Last Modified:
28 Sep 2023 00:33