Environmental, Social, and Governance (ESG) Performance and Stock Return Volatility

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Provides empirical evidence on ESG-volatility linkage in an emerging market, highlighting the need for longer-term studies and more granular ESG data.

🏢実務担当者:Limited direct applicability for corporate sustainability teams, but investors may note the weak short-term link between ESG and volatility.

🏛政策担当者:Suggests that mandatory ESG disclosure alone may not immediately impact market risk, implying complementary policies for long-term stability.

<p>This study examines the relationship between Environmental, Social, and Governance (ESG) performance and stock return volatility among firms constituting the NIFTY 50 index in the Indian equity market. Using daily stock price data spanning January 2021 to December 2025, firm-level volatility is estimated through GARCH(1,1) models, yielding measures of average conditional variance, logarithmic volatility, and volatility persistence (α + β). ESG scores sourced from National Stock Exchange of India disclosures serve as the primary explanatory variable in cross-sectional regression analysis.</p> <p>Descriptive statistics reveal that ESG scores among NIFTY 50 firms cluster within a narrow band (58–80), reflecting convergent sustainability disclosure practices among large-cap Indian companies. GARCH estimation confirms canonical features of financial return series, including volatility clustering and near-unit-root persistence. Correlation analysis indicates a weak negative association between ESG scores and logarithmic volatility; however, regression models across multiple volatility specifications yield statistically insignificant ESG coefficients, suggesting that ESG performance does not significantly explain cross-sectional variation in short-term stock return volatility within this sample.</p> <p>These findings imply that while ESG disclosure has become increasingly institutionalized in India—propelled by regulatory frameworks such as the Business Responsibility and Sustainability Reporting (BRSR) mandate—its influence on short-term market risk remains limited. The results contribute to the nascent empirical literature on ESG and financial risk in emerging markets and suggest that sustainability practices may affect corporate outcomes primarily through long-term channels, including governance quality, stakeholder trust, and reputational capital, rather than through immediate changes in return volatility. Future research incorporating longer time horizons, granular ESG pillar-level scores, and broader samples may yield richer insights into the dynamics between sustainability performance and financial market risk.</p>

• openaire https://doi.org/10.2139/ssrn.6618218first seen 2026-06-11 05:14:01 · last seen 2026-06-16 04:36:44