Influence of Corporate Social Responsibility on Stock Returns and Financial Indicators

Student: Lipkina Anna

Educational Programme: Financial Markets and Financial Institutions (Master)

Year of Graduation: 2020

This paper examines the impact of ESG on stock returns and financial indicators of 650 European companies (Northern and Western Europe) by industry and company size over the 2007-2019 horizon. The total number of observations varies from 4719 to 8734, depending on the hypothesis being tested. Overall ESG effect on stock returns and financial indicators did not reveal statistical significance for most variables. ROE showed negative association which might be a feature of the market (Northern and Western Europe) as literature does not agree on certain direction of ESG effect. At the same time, industry sensitivity was proved to be an important feature that reinforces ESG negative effect on ROE and LogReturns (accounting and market measures). However, we found out that the differential impact of ESG on big companies' Tobin’s Q and ROE is positive. On the other hand, we did not find statistical evidence of difference between ESG influence on big companies from “sensitive” and “non-sensitive” industries. Keywords: CSR, ESG, financial indicators, stock returns

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