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ESG performance, herding behavior and stock market returns: evidence from Europe

This paper tests how financial performance indicators and combined ESG score for large-cap stocks impact on stock return. In particular, we examine how market capitalization, price to book value, Sharpe ratio and ESG score of large-cap firms in Europe are related to their stock performance. We consi...

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Autores principales: Gavrilakis, Nektarios, Floros, Christos
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Berlin Heidelberg 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9930029/
http://dx.doi.org/10.1007/s12351-023-00745-1
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author Gavrilakis, Nektarios
Floros, Christos
author_facet Gavrilakis, Nektarios
Floros, Christos
author_sort Gavrilakis, Nektarios
collection PubMed
description This paper tests how financial performance indicators and combined ESG score for large-cap stocks impact on stock return. In particular, we examine how market capitalization, price to book value, Sharpe ratio and ESG score of large-cap firms in Europe are related to their stock performance. We consider a panel data consisting of six European countries—Portugal, Italy, Greece, Spain, France and Germany—for the period 2010–2020. For Greek and French firms, a firm’s size tends to negatively affect its stock returns. The investors in European countries (except Italy) do not jeopardize their returns by investing in highly ESG scoring firms. We argue that the benefit of not investing in highly ESG-scoring firms might lead investors to select smaller size companies with a higher price to book value and higher Sharpe ratio, as it is more likely to generate higher returns. Moreover, Italian firms are more susceptible to ESG issues, as ESG performance and stock return seem to have a significant negative correlation. This valuable result was confirmed by conducting a robustness test for Europe as a whole using the Euronext100 index. Finally, we find no evidence that ESG motivates herding in our selected sample (this is not the case for Greece and France), while we report evidence of ESG herding behavior during the Covid-19 outbreak in Portugal, Italy and Greece. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s12351-023-00745-1.
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spelling pubmed-99300292023-02-15 ESG performance, herding behavior and stock market returns: evidence from Europe Gavrilakis, Nektarios Floros, Christos Oper Res Int J Original Paper This paper tests how financial performance indicators and combined ESG score for large-cap stocks impact on stock return. In particular, we examine how market capitalization, price to book value, Sharpe ratio and ESG score of large-cap firms in Europe are related to their stock performance. We consider a panel data consisting of six European countries—Portugal, Italy, Greece, Spain, France and Germany—for the period 2010–2020. For Greek and French firms, a firm’s size tends to negatively affect its stock returns. The investors in European countries (except Italy) do not jeopardize their returns by investing in highly ESG scoring firms. We argue that the benefit of not investing in highly ESG-scoring firms might lead investors to select smaller size companies with a higher price to book value and higher Sharpe ratio, as it is more likely to generate higher returns. Moreover, Italian firms are more susceptible to ESG issues, as ESG performance and stock return seem to have a significant negative correlation. This valuable result was confirmed by conducting a robustness test for Europe as a whole using the Euronext100 index. Finally, we find no evidence that ESG motivates herding in our selected sample (this is not the case for Greece and France), while we report evidence of ESG herding behavior during the Covid-19 outbreak in Portugal, Italy and Greece. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s12351-023-00745-1. Springer Berlin Heidelberg 2023-02-15 2023 /pmc/articles/PMC9930029/ http://dx.doi.org/10.1007/s12351-023-00745-1 Text en © The Author(s) 2023 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) .
spellingShingle Original Paper
Gavrilakis, Nektarios
Floros, Christos
ESG performance, herding behavior and stock market returns: evidence from Europe
title ESG performance, herding behavior and stock market returns: evidence from Europe
title_full ESG performance, herding behavior and stock market returns: evidence from Europe
title_fullStr ESG performance, herding behavior and stock market returns: evidence from Europe
title_full_unstemmed ESG performance, herding behavior and stock market returns: evidence from Europe
title_short ESG performance, herding behavior and stock market returns: evidence from Europe
title_sort esg performance, herding behavior and stock market returns: evidence from europe
topic Original Paper
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9930029/
http://dx.doi.org/10.1007/s12351-023-00745-1
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