Not just for the benefit of society: The effect of ESG scores on stock performance in the ASEAN-5 Region

• Main Authors: Angeles, Louise Judielle R., Bernabe, Jose Anton Denoga, Guillermo, Mark Dave, Tianzon, Alfonso C.
• Format: text
• Language: English
• Published: Animo Repository 2022
• Subjects: Sustainable development—Southeast Asia; Price-earnings ratio—Southeast Asia
• Online Access: https://animorepository.dlsu.edu.ph/etdb_econ/51; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1053&context=etdb_econ
• Institution: De La Salle University

With the rise of awareness regarding social issues, there also comes with it a rise in consumers and investors who support businesses who make it their responsibility to perform ethical and sustainable business practices and take an active part in resolving or mitigating social issues. With that said, the recent surge of sustainable investing should reflect in a company’s valuation. To determine whether holding high ESG ratings are viewed as value-adding, unnecessary costs or a non-factor is the main objective of this paper. Stock returns are a good measure for this as stock price changes are easily monitored and reflect market sentiment regarding a firm’s prospects. This study contributes to a lacking pool of studies regarding ESG in the ASEAN region. The paper analyzes the relationship between ESG ratings and the stock returns of firms in the ASEAN-5 region (Malaysia, Singapore, Philippines, Indonesia, and Thailand) from 2016-2020 using a Pooled OLS approach. Results showed that there is an insignificant relationship between ESG ratings and stock returns. The paper concludes that it might be due to the fact that ASEAN markets aren’t yet developed enough to prioritize implementing corporate social responsibility programs on a larger scale, compared to western markets which may have led to underappreciated and improperly measured and monitored ESG ratings. Keywords: Stock Return, Stock Market, Environmental Social Governance, ESG scores, Pooled OLS