Where and When Does It Pay to Be Good? A Global Long-Term Analysis of ESG Investing

29 Pages Posted: 17 Aug 2013 Last revised: 8 Oct 2013

See all articles by Gregor Dorfleitner

Gregor Dorfleitner

University of Augsburg - Department of Statistics and Mathematical Economic Theory; University of Regensburg - Department of Finance

Sebastian Utz

University of St. Gallen - School of Finance

Maximilian Wimmer

University of Regensburg; University of Mannheim - Finance Area

Date Written: October 7, 2013

Abstract

This paper explores the long-term performance of stocks with high corporate social performance (CSP), measured by so-called ESG scores depicting the environmental (E), social (S), and governance (G) dimension. We investigate the buy-and-hold abnormal returns of a long/short investment strategy including the top and low 20% stocks with respect to each of the ESG dimensions. The results of the bootstrap tests in a world-wide perspective indicate that financial markets are not capable to price different levels of CSP in the short run and in particular in the long run properly. The zero investment strategy produces significantly positive abnormal returns up to 20% in North America and Europe in a five year period. We also identify regional differences, for instance, a high social score does not pay in Japan and strong corporate governance yields significantly negative abnormal returns in Asia Pacific.

Suggested Citation

Dorfleitner, Gregor and Dorfleitner, Gregor and Utz, Sebastian and Wimmer, Maximilian, Where and When Does It Pay to Be Good? A Global Long-Term Analysis of ESG Investing (October 7, 2013). 26th Australasian Finance and Banking Conference 2013, Available at SSRN: https://ssrn.com/abstract=2311281 or http://dx.doi.org/10.2139/ssrn.2311281

Gregor Dorfleitner

University of Augsburg - Department of Statistics and Mathematical Economic Theory ( email )

Augsburg, 86135
Germany

University of Regensburg - Department of Finance ( email )

Regensburg, 93040
Germany

Sebastian Utz

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Maximilian Wimmer (Contact Author)

University of Regensburg ( email )

Universitaetsstrasse 31
Regensburg, 93053
Germany
+49 941 943 2672 (Phone)

HOME PAGE: http://www-finance.uni-regensburg.de/Team/Maximilian-Wimmer.html

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

HOME PAGE: http://cf.bwl.uni-mannheim.de/

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