ESG rating, a booster of stock performance during the Covid-19 pandemic in Sweden?

Abstract

The purpose of this study is to analyze if ESG rating of sustainability have an influence on the stock return of Swedish firms during the Covid-19 pandemic. The aim is to contribute to the research field by conducting a study on the Swedish market, where sustainability aspects are known to be of great influence. In combination with the chosen period of Covid-19, there is a unique opportunity to examine relationships between financial performance and sustainability during a contemporary crisis. Two hypotheses are formulated based on the social restrictions that the Swedish government issued in relation to the pandemic. Both hypotheses state that firms with a high ESG rating should perform better than firms with a low ESG rating during the restriction periods. The first hypothesis applies to the first restriction period of 500 people and the second hypothesis applies to the following restriction period of 50 people. To test the hypotheses a panel data analysis is conducted on 152 firms from 10 different industry sectors. The results of the study show that the high ESG rated firms perform significantly better than the low ESG rated ones only during the more restricted period of 50 people. Thus, the second hypothesis is supported while the first hypothesis is rejected.