Does ESG Compliance Boost Indian Companies’ and Investors’ Immunity Against Economic Uncertainties: An Empirical Study?

Ashutosh Yadav

doi:10.47654/v26y2022i3p123-140

Authors

Ashutosh Yadav Department of Humanities and Social Sciences, National Institute of Technology, Patna Corresponding Author https://orcid.org/0000-0003-1179-2704

DOI:

https://doi.org/10.47654/v26y2022i3p123-140

Keywords:

Sustainability, ESG, ESG Scores, Investors’ Immunity, Panel Data Analysis

Abstract

Purpose: The purpose of the study is to empirically examine the relationship between ESG ratings and stock performance of Indian companies during economic uncertainty induced by government policies (GST and Demonetization) and the pandemic.

Design/methodology/approach: The study employs the OLS regression and Panel Data Analysis to work out how a company’s ESG scores and stock returns are associated with each other.

Findings: The present paper finds that companies having better ESG scores outperform companies having lower ESG scores in terms of stock performance during economic uncertainty. Also, when the ESG framework is broken down into its individual parts, the social component turns out to be the most important factor.

Originality/Value: This study is unique in the sense that it is one of the primary studies to know whether the Indian businesses with better ESG scores or ratings are resilient to economic uncertainties. Or in simple words, do ESG leaders’ companies perform better than ESG laggards’ companies in the time of uncertainties?

Practical Implications: The study's main takeaway, from an investors’ standpoint, is that ESG should also be considered along with technical and fundamental data while making investment decisions; and from a company’s standpoint, a company should try to be an ESG leader, which will make the company resilient to economic shocks. Besides, being an ESG-compliant company would also help in fighting climate change.

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