ESG performance and corporate volatility: an empirical exploration in an emerging economy

Purpose

This study aims to investigate into the dynamic connection between ESG scores and the volatility term structure for Indian companies listed BSE. The study divides the BSE-100 listed companies into two panels based on their median ESG scores in 2022, creating high and low ESG scoring groups to capture volatility structure.

Design/methodology/approach

The study employs time-varying symmetric and asymmetric GARCH models and followed by continuous Wavelet to capture volatility structure and explore comparative resilience behavior.

Findings

The study found similar volatility patterns regardless of ESG scores, nudging doubt on the direct impact of ESG on volatility. Additionally, both high- and low-ESG-scored companies displayed high vulnerabilities during the pandemic, raising questions about the effectiveness of ESG frameworks in capturing risks. Finally, by examining the resilience behavior of ESG-scored companies during the pandemic, our study contributes to the evolving understanding of the intersection between ESG performance and crisis response.

Practical implications

The study carries vital implications for investors and policymakers. It highlights the urgent need to strengthen the ESG framework and scores to shield investors from short- and long-term volatilities and economic vulnerabilities.

Originality/value

To the best of the authors’ knowledge, this is the first study investigating the Indian market by examining the volatility structure and resilience behavior of high- and low-ESG-scored companies during the pandemic.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2024-0113