| Abstract [eng] |
Financial institutions are a significant part of the global economy, and their stock prices, like other equities, respond to various economic and non-economic factors. This paper focuses on analyzing the extent to which the ESG rating can influence the performance of European financial institutions' stocks. The importance of analyzing Environmental, Social, and Governance (ESG) risks and the impact of ESG on investments has grown significantly since the concept of ESG was first introduced in the United Nations report "Who Cares Wins" in 2004. The literature review explores the evolution of the ESG concept, criticisms of ESG practices, Corporate Social Responsibility (CSR) theories, and recent academic studies analyzing the impact of ESG on the stock prices of financial institutions and overall corporate financial performance. While results vary, many studies have found a statistically significant positive relationship between corporate ESG metrics and stock returns or other financial indicators. However, to gain a deeper understanding of these relationships, it is necessary to analyze specific regions and industries in greater detail. In this study, a quartile analysis was conducted to evaluate the relationship between the stock returns of European financial institutions, their volatility (standard deviation), and ESG scores. Additionally, panel regression models were developed to examine the connection between the stock returns of European financial institutions and their ESG scores. The regression analysis results from the European financial institutions' sample were compared to non-European countries' data to determine whether the stock prices of European financial institutions are more sensitive to changes in ESG scores. The regression analysis revealed a positive and significant relationship between the environmental score of European financial institutions and their annual stock returns. Compared to the non-European sample, the stock returns of European financial institutions were more sensitive to changes in environmental scores, with significant results observed only in the European sample. The data indicate that if the environmental score of a European financial institution increases by one point, its annual stock return could grow by 4.07%. The other two ESG metrics (social and governance) did not yield statistically significant results. Furthermore, a significant negative relationship was observed between the stock prices of financial institutions and inflation. The findings of the regression analysis are supported by the conclusions of the quartile analysis: the highest standard deviation (first quartile) was associated with the highest average environmental score and the second-highest stock return. Additionally, the lowest average environmental score was linked to the lowest stock return, while the highest stock return was associated with the second-highest average environmental score. |
