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ESG and Loss Recovery Level - Focusing on the Early Stages of COVID 19 Crisis

  • Asset Management Review
  • Abbr : AMR
  • 2021, 9(2), pp.22~40
  • DOI : 10.23007/amr.2022.9.2.22
  • Publisher : Institute of Management Research, SungKyunKwan University
  • Research Area : Social Science > Business Management > Finance
  • Received : October 29, 2021
  • Accepted : November 25, 2021
  • Published : December 31, 2021

Hwanyoung Yeo 1,  Inwook Song 2

1KB자산운용
2성균관대학교

Accredited

ABSTRACT

The purpose of this study is to examine whether ESG evaluation grades can be used as investment indicators during crisis periods. To this end, we analyzed the relationship between a company's ESG evaluation grade, stock price volatility, and cumulative excess return for each event according to the spread of COVID-19 using an industry fixed effect model. The analysis results are as follows. First, we looked at whether there was a difference in transaction activities according to the ESG score during COVID-19. As a result of the analysis, we did not find any differences in transaction activities according to ESG scores due to a significant increase in transaction activities across the market during the Pandemic period. However, we found that the high ESG group showed a greater increase during the Pandemic period in terms of daily average transaction price, and the low ESG showed a greater increase in terms of daily average transaction volume. Second, we examined the relationship between the cumulative rate of return and the cumulative excess rate of return before and after the time of the COVID-19 incident and the ESG score. As a result, we found that there was no significant relationship between ESG scores and returns. In addition, we used dummy variables to examine whether the degree of influence of ESG factors on returns during the normal and crisis periods was different. As a result, we confirmed that there was no significant difference in the effect of ESG factors on corporate returns during the normal and crisis periods. These results are evidence showing that there is no significant relationship between ESG scores and returns. Third, we analyzed whether it is possible to secure stability in profits when investing in consideration of ESG scores in a global crisis caused by COVID-19. As a result, we found that ESG factors had a significant negative (-) effect on volatility. However, as a result of analyzing ESG factors by dividing them into detailed factors, it was found that the S and G factors did not have a significant effect, but the E factor significantly reduced volatility. In other words, the relationship between detailed ESG factors and volatility was different depending on the relationship with ESG factors. This study has practical and academic significance in that it indirectly investigates what utility investors could have obtained when investing using ESG evaluation ratings during the COVID-19 crisis and re-analyzes the results of previous studies that present mixed results.

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