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ESG did not immunize stocks during the COVID‐19 crisis, but investments in intangible assets did
Author(s) -
Demers Elizabeth,
Hendrikse Jurian,
Joos Philip,
Lev Baruch
Publication year - 2021
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12523
Subject(s) - covid-19 , financial crisis , business , stock (firearms) , corporate governance , economics , monetary economics , financial economics , finance , macroeconomics , medicine , mechanical engineering , disease , pathology , infectious disease (medical specialty) , engineering
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 for 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 those investments in intangible assets did.