Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash

42 Pages Posted: 24 Apr 2020 Last revised: 28 Aug 2021

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Yrjo Koskinen

Haskayne School of Business, University of Calgary; European Corporate Governance Institute (ECGI)

Shuai Yang

University of Calgary - Haskayne School of Business

Chendi Zhang

University of Exeter Business School

Date Written: June 22, 2020

Abstract

The COVID-19 pandemic and the subsequent lockdown brought about an exogenous and unparalleled stock market crash. The crisis thus provides a unique opportunity to test theories of environmental and social (ES) policies. This paper shows that stocks with higher ES ratings have significantly higher returns, lower return volatility, and higher operating profit margins during the first quarter of 2020. ES firms with higher advertising expenditures experience higher stock returns, and stocks held by more ES-oriented investors experience less return volatility during the crash. This paper highlights the importance of customer and investor loyalty to the resiliency of ES stocks.

Keywords: ESG, CSR, COVID-19, market crash, exogenous shock, stock returns, volatility, customer loyalty, investor loyalty

JEL Classification: G12, G32, M14

Suggested Citation

Albuquerque, Rui A. and Koskinen, Yrjo J and Yang, Shuai and Zhang, Chendi, Resiliency of Environmental and Social Stocks: An Analysis of the Exogenous COVID-19 Market Crash (June 22, 2020). European Corporate Governance Institute – Finance Working Paper No. 676/2020, Available at SSRN: https://ssrn.com/abstract=3583611 or http://dx.doi.org/10.2139/ssrn.3583611

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://sites.google.com/view/ruialbuquerque/home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Yrjo J Koskinen

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://https://profiles.ucalgary.ca/yrjo-koskinen

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/yrj%C3%B6-koskinen

Shuai Yang

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Chendi Zhang

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

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