Degree
Master of Science in Finance
Department
Department of Finance
School
School of Business Studies (SBS)
Date of Submission
Spring 2024
Supervisor
Dr. Hilal Anwar Butt, Professor and Chairperson, Department of Finance
Submission Type
Research Project
Document Type
Restricted Access
Pages
ix, 48
Keywords
ESG, Downside risk, Risk, Value at Risk, Expected Shortfall
Abstract
The findings indicate significant and inverse relationship between ESG scores and downside risk, suggesting that firms with higher ESG scores tend to exhibit lower risk of extreme negative returns. Specifically, the results show that ESG factors are negatively correlated with 1% and 5% VaR, ES and NPR. This implies that incorporating ESG considerations can potentially reduce financial risks, thus adding value to the firm's risk management strategies. In contrast, crash risk measures shown lack of significance indicating no impact of ESG scores on crash risk measures. This also suggests that ESG score helps reduce the extreme risk, but the crash risk is not reduced significantly for the firms with higher ESG score. This research contributes valuable insights into the interplay between ESG scores and downside risk, supporting the broader integration of sustainability into financial analysis and decision-making. By demonstrating the risk reduction potential of ESG factors, the study advocates for a more sustainable and resilient approach to corporate governance and investment practices. However, these results should be interpreted with some caution as the crash risk still lurks around the firms despite achieving higher ESG score.
Recommended Citation
Awan, A. (2024). Impact of ESG Scores on Downside Risk of Firms (Us Stock Market Analysis) (Unpublished master's thesis). Retrieved from https://ir.iba.edu.pk/research-projects-msfin/9
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