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ESG, liquidity, and stock returns

ESG, liquidity, and stock returns
ESG, liquidity, and stock returns
We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.
1042-4431
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f

Luo, Di (2022) ESG, liquidity, and stock returns. Journal of International Financial Markets, Institutions and Money, [101526]. (doi:10.1016/j.intfin.2022.101526).

Record type: Article

Abstract

We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.

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Accepted/In Press date: 7 February 2022
e-pub ahead of print date: 22 February 2022
Published date: 10 March 2022

Identifiers

Local EPrints ID: 454495
URI: http://eprints.soton.ac.uk/id/eprint/454495
DOI: doi:10.1016/j.intfin.2022.101526
ISSN: 1042-4431
PURE UUID: 5338fc62-df15-418a-a7ee-4d083b893ff9
ORCID for Di Luo: ORCID iD orcid.org/0000-0001-7405-6347

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Date deposited: 14 Feb 2022 17:33
Last modified: 08 May 2024 01:50

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Author: Di Luo ORCID iD

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