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

57 Pages Posted: 1 Jul 2017 Last revised: 13 Sep 2021

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

Date Written: August 25, 2021

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. 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.

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 (August 25, 2021). 30th Australasian Finance and Banking Conference 2017, Journal of Banking and Finance, Forthcoming, 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 - Lancaster University Management School ( email )

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

HOME PAGE: http://www.chelseayao.com

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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