ESG Didn’t Immunize Stocks During the COVID-19 Crisis, But Investments in Intangible Assets Did

Journal of Business Finance & Accounting, 48, 433-462. Open Access: http://dx.doi.org/10.1111/jbfa.12523

46 Pages Posted: 18 Aug 2020 Last revised: 22 Aug 2021

See all articles by Elizabeth Demers

Elizabeth Demers

University of Waterloo

Jurian Hendrikse

Tilburg University

Philip Joos

Tilburg University

Baruch Lev

New York University - Stern School of Business

Date Written: March 1, 2021

Abstract

Environmental, social, and governance (“ESG”) scores have been widely touted as indicators of share price resilience during the COVID-19 crisis. Contrary to this conventional wisdom, we present robust evidence that, once industry affiliation, market-based measures of risk, and accounting-based measures of performance, financial position, and intangibles investments have been controlled for, ESG offers no such positive explanatory power for returns during the COVID crisis. Specifically, ESG is insignificant in fully specified returns regressions for each of the Q1 2020 COVID market crisis period, and for the full COVID year of 2020. By contrast, a measure of the firm’s stock of investments in internally generated intangible assets is an economically and statistically significant positive determinant of returns during each of the Q1 market implosion and full 2020 COVID year periods. Our results are robust to alternative measures of returns, as well as to using Refinitiv, Refinitiv II, and MSCI data to capture ESG performance. We conclude that ESG did not immunize stocks during the COVID-19 crisis, but that investments in intangible assets did.

Keywords: ESG, COVID-19, CSR, Corporate Social Responsibility, Share Price Resilience, Crisis, Intangibles, Market Crash

JEL Classification: G01, G32, M14, M41

Suggested Citation

Demers, Elizabeth and Hendrikse, Jurian and Joos, Philip and Lev, Baruch Itamar, ESG Didn’t Immunize Stocks During the COVID-19 Crisis, But Investments in Intangible Assets Did (March 1, 2021). Journal of Business Finance & Accounting, 48, 433-462. Open Access: http://dx.doi.org/10.1111/jbfa.12523, Available at SSRN: https://ssrn.com/abstract=3675920 or http://dx.doi.org/10.2139/ssrn.3675920

Elizabeth Demers (Contact Author)

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Jurian Hendrikse

Tilburg University ( email )

School of Economics and Management
Warandelaan 2
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Philip Joos

Tilburg University ( email )

School of Economics and Management
Warandelaan 2
Tilburg, 5000 LE
Netherlands
31 13 4668716 (Phone)
31 13 4668001 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/philjoos/

Baruch Itamar Lev

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

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