Environmental, social, and governance (ESG) and idiosyncratic volatility: The COVID‐19 pandemic and its impact on ESG‐sensitive industries

Author:

Kim Jihun1,Kang Jongho2,Hyun Suk3

Affiliation:

1. College of Humanities & Social Sciences Convergence Yonsei University Wonju Gangwon Republic of Korea

2. College of Business, Korea Advanced Institute of Science and Technology (KAIST) Seoul Republic of Korea

3. Graduate School of Environmental Finance and College of Humanities & Social Sciences Convergence Yonsei University Wonju Gangwon Republic of Korea

Abstract

AbstractThis study provides an in‐depth examination of the relationship between environmental, social, and governance (ESG) performance and the idiosyncratic volatility of Korean companies. In line with the risk‐mitigation view, the study finds that strong ESG performance is associated with a reduction in a firm's idiosyncratic volatility. The impact of ESG performance on reducing firm volatility was particularly evident during the COVID‐19 pandemic, highlighting the role of ESG performance in risk mitigation during crisis periods. The study also shows that companies with strong ESG performance in industries that are highly sensitive to ESG factors are particularly adept at reducing idiosyncratic volatility. These findings underscore the importance of ESG enhancement for both firm managers and policymakers, particularly within ESG‐sensitive industries.

Publisher

Wiley

Subject

Management, Monitoring, Policy and Law,Organizational Behavior and Human Resource Management,Economics and Econometrics,Philosophy,Business and International Management

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