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

45 Pages Posted: 1 Jul 2017 Last revised: 18 Nov 2020

See all articles by Mark B. Shackleton

Mark B. Shackleton

Lancaster University - Department of Accounting and Finance

Jiali Yan

University of Liverpool - Management School (ULMS)

Chelsea Yaqiong Yao

Lancaster University - Management School; New York University (NYU) - Leonard N. Stern School of Business

Date Written: November 18, 2020

Abstract

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. We show these patterns are present in firms more susceptible to customer awareness, firms with more financial slacks, and when social trust in those firms is low, which is consistent with the view that firms engage in ES activities to rebuild their image. Where social trust and customer awareness are of less concern, corporate ES activities could harm future stock returns. Further, we demonstrate that poor short-term stock performance can lead to better voting outcomes for ES shareholder proposals.

Keywords: ES Performance, Stock Market Performance, Corporate Governance

JEL Classification: G12, G23, G32

Suggested Citation

Shackleton, Mark B. and Yan, Jiali and Yao, Yaqiong, What Drives a Firm's ES Performance? Evidence from Stock Returns (November 18, 2020). 30th Australasian Finance and Banking Conference 2017, Available at SSRN: https://ssrn.com/abstract=2994989 or http://dx.doi.org/10.2139/ssrn.2994989

Mark B. Shackleton

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
44 1524 594131 (Phone)
44 1524 847321 (Fax)

Jiali Yan

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Yaqiong Yao (Contact Author)

Lancaster University - Management School ( email )

Department of Accounting and Finance
Lancaster University Management School
Lancaster, LA1 4YX
United Kingdom

New York University (NYU) - Leonard N. Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY NY 10012
United States

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