Corporate sustainability performance, stock returns, and ESG indicators: fresh insights from EU member states.

Abstract

It is believed that sustainable practices like environmental, social, and governance mechanisms help in providing a sustainable outlook for both companies and the governments. Such practices have their long-term impact on the stock returns and sustainable performance dynamics. This research aims to investigate the dynamic relationship between ESG indicators, stock returns, and sustainable performance reflected through economic, environmental, and social dimensions during 2010-2018. Panel data has been collected from various listed companies working in EU member states and analyzed through advanced panel estimations. The study findings inferred a significant and positive impact of all three measures of sustainable practices as reflected by targeted firms in the EU region on economic, environmental, and social dimensions of performance. On the other hand, those firms reporting higher ESG disclosure in their annual reports confirm better stock returns. Finally, study findings reveal that ESG dynamics provide a valuable contribution in creating some sustainable edge under the theoretical foundation of different theories. The study findings would greatly support providing a meaningful model for the listed firms to focus on their ESG indicators for higher performance in EES and stock returns. Finally, the current study expects to stimulate more theoretical and empirical work on ESG and EES. Future studies are suggested to consider the relationship between the stated variables regarding pre- and post-pandemic duration.