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The impact of environmental, social, and governance performance on stock prices: Evidence from the banking industry

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  • María Mar Miralles‐Quirós
  • José Luis Miralles‐Quirós
  • Jesús Redondo‐Hernández

Abstract

After the global financial crisis, commercial banks have increased their social responsibility activities with the aim of reinforcing the credibility and trust that their stakeholders have in them. However, prior research about the value relevance for their financial stakeholders of these sustainable practices is scarce. In this context, the aim of this research is to examine whether environmental, social, and governance (ESG) performance of commercial banks listed on 20 different stock markets provides relevant information and has a significant impact on stock prices over the 2002–2015 period. Our overall results reveal that stock market investors value the three ESG pillars in a different manner. We also observe that the value relevance of ESG performance is significantly higher for banks from common law countries and after the global financial crisis. These findings could have several implications for internal and external stakeholders such as managers, investors, and market regulators.

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  • María Mar Miralles‐Quirós & José Luis Miralles‐Quirós & Jesús Redondo‐Hernández, 2019. "The impact of environmental, social, and governance performance on stock prices: Evidence from the banking industry," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1446-1456, November.
    • Handle: RePEc:wly:corsem:v:26:y:2019:i:6:p:1446-1456
    DOI: 10.1002/csr.1759
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    Cited by:

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    2. Carlo Drago & Loris Di Nallo & Maria Lucetta Russotto, 2023. "Social Sustainability in European Banks: A Machine Learning Approach using Interval- Based Composite Indicators," Working Papers 2023.13, Fondazione Eni Enrico Mattei.
    3. Billio, Monica & Costola, Michele & Hristova, Iva & Latino, Carmelo & Pelizzon, Loriana, 2022. "Sustainable finance: A journey toward ESG and climate risk," SAFE Working Paper Series 349, Leibniz Institute for Financial Research SAFE.
    4. Jannik Gerwanski, 2020. "Does it pay off? Integrated reporting and cost of debt: European evidence," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2299-2319, September.
    5. Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2021. "Corporate Sustainability and Stock Value in Asian–Pacific Emerging Markets: Synergies or Tradeoffs among ESG Factors?," Sustainability, MDPI, vol. 13(11), pages 1-25, June.
    6. David Castillo-Merino & Gonzalo Rodríguez-Pérez, 2021. "The Effects of Legal Origin and Corporate Governance on Financial Firms’ Sustainability Performance," Sustainability, MDPI, vol. 13(15), pages 1-20, July.
    7. Marjan Petreski & Stefan Tanevski & Irena Stojmenovska, 2023. "Employment, labor productivity and environmental sustainability: Firm-level evidence from transition," Papers 2310.18989, arXiv.org.
    8. Irene Aldridge & Payton Martin, 2022. "ESG In Corporate Filings: An AI Perspective," Papers 2212.00018, arXiv.org.
    9. Hai-Yen Chang & Lien-Wen Liang & Yu-Luan Liu, 2021. "Using Environmental, Social, Governance (ESG) and Financial Indicators to Measure Bank Cost Efficiency in Asia," Sustainability, MDPI, vol. 13(20), pages 1-20, October.

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