Does Firm's Environmental Footprint Mitigate the Market Reaction to COVID-19 Uncertainty?

32 Pages Posted: 11 Sep 2020

See all articles by Alessio Bongiovanni

Alessio Bongiovanni

University of Turin - Department of Management

Simona Fiandrino

University of Turin - Department of Management

Date Written: June 20, 2020

Abstract

This paper investigates how firms with high environmental performance have reacted to the feverish stock market movements caused by the COVID-19 uncertainty. Our analysis focuses on a sample of 3,869 non-financial listed companies from 21 advanced economies. We find that high environmentally sustainable practices are associated with lower market performance during the COVID-19 crisis, especially when the pandemic began to spread globally. This relation is explained by the stronger contractions in earnings and cash flows forecasts. The cost structure of firms that have already implemented environmental initiatives makes them more exposed to the unexpected global demand shock. Overall, our findings suggest that, in the short-term, periods of high uncertainty and feverish market movements negatively affect environmentally-friendly firms.

Keywords: COVID-19, Environmentally sustainable practices, Stock returns, ESG, Market uncertainty

JEL Classification: G15, G12, M14

Suggested Citation

Bongiovanni, Alessio and Fiandrino, Simona, Does Firm's Environmental Footprint Mitigate the Market Reaction to COVID-19 Uncertainty? (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3689070 or http://dx.doi.org/10.2139/ssrn.3689070

Alessio Bongiovanni (Contact Author)

University of Turin - Department of Management

C.so Unione Sovietica, 218 bis
Turin, Turin 10134
Italy

Simona Fiandrino

University of Turin - Department of Management ( email )

C.so Unione Sovietica, 218 bis
Turin, Turin 10100
Italy

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