Corporate Resilience During the Covid-19 Pandemic: the Role of ESG Performance and Financial Flexibility
Abstract
Stocks of substantial ESG firms have been claimed to perform better during crisis periods and consequently serve as an "equity vaccine" for investors. This study explores ESG ratings and financial flexibility's impact on stock performance. We test these hypotheses in the ASEAN-5 setting by assessing the relation between ESG and financial flexibility to stock price resilience in terms of time to recover during 2020 and 2021. The method used in this study is a cross-sectional data regression analysis. In a sample of 142 stocks from 5 countries consisting of Indonesia, Malaysia, Thailand, Philippines, and Singapore, we found that firms with higher ESG ratings had a better stock market performance. They tend to recover faster to achieve their lowest price in 2019. We also discovered that having more cash and liquid assets before Covid-19 doesn't make a company better at dealing with the impacts of the pandemic compared to other companies.
Keywords: ASEAN-5; corporate resilience; covid-19; ESG; financial flexibility
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References
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Xia, Y., Qiao, Z., Xie, G., 2022b. Corporate resilience to the COVID-19 pandemic: The role of digital finance. Pacific-Basin Financ. J. 74, 101791. https://doi.org/10.1016/j.pacfin.2022.101791
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Alharire, B., Alalwani, N., 2021. Stock market performance in Sweden during Covid -19 1–41.
Alipour, M., Mohammadi, M.F.S., Derakhshan, H., 2015. Determinants of capital structure: An empirical study of firms in Iran. Int. J. Law Manag. 57, 53–83. https://doi.org/10.1108/IJLMA-01-2013-0004
Andrew Willis, 2020. ESG as an Equity Vaccine [WWW Document]. URL https://www.morningstar.ca/ca/news/201741/esg-as-an-equity-vaccine.aspx (accessed 6.4.23).
Bae, K.H., El Ghoul, S., Gong, Z. (Jason), Guedhami, O., 2021. Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic. J. Corp. Financ. https://doi.org/10.1016/j.jcorpfin.2020.101876
Broadstock, D.C., Chan, K., Cheng, L.T.W., Wang, X., 2020. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID- 19 . The COVID-19 resource centre is hosted on Elsevier Connect , the company ’ s public news and information .
Cardillo, G., Bendinelli, E., Torluccio, G., 2022. COVID‐19, ESG investing, and the resilience of more sustainable stocks: Evidence from European firms. Bus. Strateg. Environ. https://doi.org/10.1002/bse.3163
Demers, E., Hendrikse, J., Joos, P., Lev, B., 2021. ESG did not immunize stocks during the COVID-19 crisis, but investments in intangible assets did. J. Bus. Financ. Account. 48, 433–462. https://doi.org/10.1111/jbfa.12523
Ding, W., Levine, R., Lin, C., Xie, W., 2021. Corporate immunity to the COVID-19 pandemic. J. financ. econ. 141, 802–830. https://doi.org/10.1016/j.jfineco.2021.03.005
El Khoury, R., Nasrallah, N., Harb, E., Hussainey, K., 2022. Exploring the performance of responsible companies in G20 during the COVID-19 outbreak. J. Clean. Prod. 354, 131693. https://doi.org/10.1016/j.jclepro.2022.131693
Engelhardt, N., Ekkenga, J., Posch, P., 2021. Esg ratings and stock performance during the covid-19 crisis. Sustain. 13, 1–15. https://doi.org/10.3390/su13137133
Fahlenbrach, R., Rageth, K., Stulz, R.M., 2021. How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis. Rev. Financ. Stud. 34, 5474–5521. https://doi.org/10.1093/rfs/hhaa134
Garel, A., Petit-Romec, A., 2021. The Resilience of French Companies to the COVID-19 Crisis. Finance Vol. 42, 99–137. https://doi.org/10.3917/fina.423.0099
Gianfrate, G., Kievid, T., Dijk, M. van, 2021. On the Resilience of ESG Stocks during COVID-19: Global Evidence. Netspar Ind. Ser. 175, 4–40.
Grube, C., Park, S.-Y., Rüden, J., 2020. Moving from Cash Preservation to Cash Excellence for the Next Normal [WWW Document]. URL https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/moving-from-cash-preservation-to-cash-excellence-for-the-next-normal#/ (accessed 6.4.23).
Mounir, H., Ali, H., 2022. Corporate immunity during crises and pandemics : does ESG matter ? Literature review and future prospects. https://doi.org/10.1108/MSAR-10-2022-0047
Mousa, M., Saleem, A., Sági, J., 2022. Are esg shares a safe haven during covid-19? Evidence from the arab region. Sustain. 14. https://doi.org/10.3390/su14010208
Oad Rajput, S.K., Wongchoti, U., Chen, J., Faff, R., 2019. Is Financial Flexibility a Priced Factor in the Stock Market? Financ. Rev. 54, 345–375. https://doi.org/10.1111/fire.12170
Pisani, F., Russo, G., 2021. Sustainable finance and covid-19: The reaction of esg funds to the 2020 crisis. Sustain. 13. https://doi.org/10.3390/su132313253
Syafrullah, S., Muharam, H., 2017. Analisis Pengaruh Kinerja Environmental , Social , Dan Governance ( Esg ) Terhadap Abnormal Return. Diponegoro J. Manag. 6, 1–14.
Xia, Y., Qiao, Z., Xie, G., 2022a. Corporate resilience to the COVID-19 pandemic: The role of digital finance. Pacific-Basin Financ. J. 74, 101791. https://doi.org/10.1016/j.pacfin.2022.101791
Xia, Y., Qiao, Z., Xie, G., 2022b. Corporate resilience to the COVID-19 pandemic: The role of digital finance. Pacific-Basin Financ. J. 74, 101791. https://doi.org/10.1016/j.pacfin.2022.101791
Xu, L., 2021. Stock Return and the COVID-19 pandemic: Evidence from Canada and the US. Financ. Res. Lett. 38, 101872. https://doi.org/10.1016/j.frl.2020.101872
Yingxu, Y., 2020. The Impact of ESG Performance During Times of Crisis, Green Financial Perspectives - Proceeds of the Central European Scientific Conference on Green Finance and Sustainable Development, October 2020. Cornivus University of Budapest, Budapest. https://doi.org/10.14267/978-963-503-890-9
Zhou, D., Zhou, R., 2022. Esg performance and stock price volatility in public health crisis: Evidence from covid-19 pandemic. Int. J. Environ. Res. Public Health 19. https://doi.org/10.3390/ijerph19010202
Published
2024-06-17
How to Cite
KHRISNA ARIYUDHA, Pande Putu; ROKHIM, Rofikoh.
Corporate Resilience During the Covid-19 Pandemic: the Role of ESG Performance and Financial Flexibility.
Matrik : Jurnal Manajemen, Strategi Bisnis, dan Kewirausahaan, [S.l.], p. 1 - 15, june 2024.
ISSN 2302-8890.
Available at: <https://ojs.unud.ac.id/index.php/jmbk/article/view/102101>. Date accessed: 26 oct. 2024.
doi: https://doi.org/10.24843/MATRIK:JMBK.2024.v18.i01.p01.
Section
Articles
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
