Responsible Investment and Stock Market Shocks: Short-Term Insurance and Persistent Outperformance Post-Crisis?

SAFE Working Paper No. 329 Updated version published as: Eisenkopf, J., Juranek, S., & Walz, U. (2022). Responsible Investment and Stock Market Shocks: Short‐Term Insurance without Persistence. British Journal of Management. https://doi.org/10.1111/1467-8551.12664

23 Pages Posted: 10 Dec 2021 Last revised: 26 Jan 2023

See all articles by Jana Eisenkopf

Jana Eisenkopf

Goethe University Frankfurt, House of Finance, Students

Steffen Juranek

Norwegian School of Economics (NHH) - Department of Business and Management Science

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Leibniz Institute for Financial Research SAFE

Date Written: December 7, 2021

Abstract

We investigate the differential effect of the COVID-19 shock to the stock market shock on the share prices of firms with different levels of ESG (Environmental, Social and Governance) scores. Thereby, we analyse whether and to what extent better ESG ratings provided insurance for investors in the stocks of those firms during this shock. We focus our analysis on the European market in which ESG investment plays a particularly important role. Using a broad sample of listed firms we provide mixed evidence. On the one hand, we show that immediately after the start of the shock firms with a higher ESG score outperformed their peers. On the other hand, this effect faded less than six weeks later. Given the quick recovery of the market our finding supports the idea that ESG stocks provide limited insurance in severe crises.

Keywords: Responsible investment, ESG, stock market crisis, persistence

Suggested Citation

Eisenkopf, Jana and Juranek, Steffen and Walz, Uwe, Responsible Investment and Stock Market Shocks: Short-Term Insurance and Persistent Outperformance Post-Crisis? (December 7, 2021). SAFE Working Paper No. 329 Updated version published as: Eisenkopf, J., Juranek, S., & Walz, U. (2022). Responsible Investment and Stock Market Shocks: Short‐Term Insurance without Persistence. British Journal of Management. https://doi.org/10.1111/1467-8551.12664, Available at SSRN: https://ssrn.com/abstract=3979761 or http://dx.doi.org/10.2139/ssrn.3979761

Jana Eisenkopf

Goethe University Frankfurt, House of Finance, Students ( email )

Frankfurt
Germany

Steffen Juranek

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Uwe Walz (Contact Author)

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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