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Do ESG Ratings Affect Stock Prices? The Case of Developed and Emerging Stock Markets

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  • Yavuz GÜL
  • Ceren ALTUNTAŞ

Abstract

This paper examines the role of ESG ratings on stock returns. The sample covers 347 companies from 2010 to 2022 from advanced and emerging stock markets. Return on assets, debt to equity, price-to-book ratio, and price-to-earnings ratio were used as control variables, and panel regression analysis was employed. Results revealed that ESG rating and return on assets statistically positively influence stock market performance. When the components of ESG were tested individually, it was observed that E (environmental) and S (social) ratings positively affect the stock prices. However, no significant relationship was found between G (corporate governance) rating and returns. These findings indicate the importance of investing in stocks and prioritising environmental, social, and governmental concerns regarding portfolio selection decisions. Findings also provide new sights and show that firms, especially in emerging markets, might enhance their market values by paying attention to ESG practices.

Suggested Citation

  • Yavuz GÜL & Ceren ALTUNTAŞ, 2024. "Do ESG Ratings Affect Stock Prices? The Case of Developed and Emerging Stock Markets," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    • Handle: RePEc:sos:sosjrn:240212
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    Cited by:

    1. Enylina Nordin & Wan Shafizah Hussain & Mohd Tarmizi Ibrahim & Mohd Hisham Johari & Muhamad Reduan Abdul Malik, 2026. "ESG and Stock Performance: A Systematic Review of Heterogeneous Effects, Measurement Challenges, and Investment Implications," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(3), pages 4530-4542, March.
    2. Parra-Domínguez, Javier & Dote-Pardo, Jairo, 2025. "Corporate sustainability and stock market dynamics: What challenges arise for future research?," Innovation and Green Development, Elsevier, vol. 4(5).

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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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