Environmental, Social and Governance Practices and Capital Market Response: Evidence from Emerging Countries

Abstract

This study aims to investigate the impact of ESG practices on the capital market response of emerging countries in terms of market-adjusted returns (MAR), market value added (MVA), and Tobin's Q (TQ). The study used the data of 1042 firms from 26 emerging countries from 2010 to 2019. The data was collected from Refinitiv ESG (formerly Thomson Reuter Asset4) and DataStream; and used the panel data regression technique such as fixed effects (FE), random effects (RE), and Feasible Generalized Least Square (FGLS) models. Results showed that pillar-wise, Environmental, Social, and Governance scores and aggregate ESG scores have a significant and positive impact on capital market response. To the best of author's knowledge, limited studies demonstrate the association between ESG practices and capital market response in emerging countries. Therefore, the current study has useful implications for investors, regulators, socially responsible analysts, and policymakers of emerging countries, as well as it is also essential for government agencies and other related agencies in emerging countries.