Environment, Social, and Governance Performance and Firm Risk : A Study of the Indian Consumer Goods Sector

Authors

  •   Khushboo Gupta Assistant Professor (Corresponding Author), Shaheed Bhagat Singh Evening College, University of Delhi, Sheikh Sarai Phase II, New Delhi -110 017
  •   T. V. Raman Professor, Amity Business School, Amity University, Sector 125, Noida - 201313, Uttar Pradesh
  •   O. S. Deol Associate Professor, Shaheed Bhagat Singh Evening College, University of Delhi, Sheikh Sarai Phase II, New Delhi - 110017
  •   Kanishka Gupta Assistant Professor, Symbiosis Centre for Management Studies, Noida, Symbiosis International (Deemed University), Plot No. 47 & 48, Block A, Sector 62, Noida - 201 301, Uttar Pradesh.

DOI:

https://doi.org/10.17010/ijf/2022/v16i8/171373

Keywords:

ESG

, systematic risk, unsystematic risk, total risk, consumer goods sector

JEL Classification Codes

JEL Classification Codes

Paper Submission Date

, July 30, 2021, Paper sent back for Revision, March 23, 2022, Paper Acceptance Date, April 10, Paper Published Online, August 16, 2022

Abstract

The objective of the present study was to find the impact of environment, social, and governance (ESG) performance on market measures of risk of Indian consumer goods companies. Mann – Whitney U test was used to compare the risk of companies with high ESG scores and low ESG scores. Ordinary least squares regression was used to find the impact of ESG on systematic, unsystematic, and total risk. Mann – Whitney U test showed that the firms with high ESG scores had lower total and unsystematic risk. The difference in systematic risk of high ESG and low ESG firms was insignificant. The regression results showed that systematic, unsystematic, and total risk was negatively related to the composite ESG score. Individual environment and the social and governance scores showed a negative association with total and unsystematic risk, but only social performance showed a negative association with systematic risk. In a nutshell, superior ESG performance reduced the risk of Indian consumer goods companies and helped increase shareholders’ wealth. Thus, ESG should be considered important by the companies, and they should proactively undertake activities that are responsible to all stakeholders.

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Published

2022-08-01

How to Cite

Gupta, K., Raman, T. V., Deol, O. S., & Gupta, K. (2022). Environment, Social, and Governance Performance and Firm Risk : A Study of the Indian Consumer Goods Sector. Indian Journal of Finance, 16(8), 29–45. https://doi.org/10.17010/ijf/2022/v16i8/171373

Issue

Volume 16, Issue 8, August 2022

Section

Articles
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