First-Difference regression of ESG scores on Beta
| Variables | (1) | (2) | (3) | (4) | (5) | (6) |
|---|---|---|---|---|---|---|
| 3-year Beta minus 5-year Beta | 3-year Beta minus 5-year Beta | 3-year Beta + minus 5-year Beta+ | 3-year Beta + minus 5-year Beta+ | 3-year Beta- minus 5-year Beta- | 3-year Beta- minus 5-year Beta- | |
| ESGt – ESGt-4 | 0.0008*** | 0.0004 | 0.0006** | |||
| (0.0002) | (0.0003) | (0.0003) | ||||
| ESGt – ESGt-5 | 0.0005*** | 0.0003* | 0.0006*** | |||
| (0.0001) | (0.0002) | (0.0002) | ||||
| ROA | −0.0060*** | −0.0053*** | −0.0016 | −0.0003 | −0.0036** | −0.0030** |
| (0.0012) | (0.0013) | (0.0015) | (0.0016) | (0.0014) | (0.0015) | |
| Employees | 0.0000 | 0.0000 | −0.0000*** | −0.0000** | −0.0000 | −0.0000 |
| (0.0000) | (0.0000) | (0.0000) | (0.0000) | (0.0000) | (0.0000) | |
| Quick ratio | 0.0105* | 0.0061 | −0.0010 | −0.0003 | −0.0014 | −0.0018 |
| (0.0060) | (0.0064) | (0.0079) | (0.0081) | (0.0072) | (0.0074) | |
| Debt to equity ratio | −0.0003*** | −0.0003*** | −0.0005*** | −0.0006*** | −0.0006*** | −0.0005*** |
| (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | |
| Price-to-book | 0.0109*** | 0.0092** | 0.0266*** | 0.0247*** | 0.0338*** | 0.0286*** |
| (0.0037) | (0.0039) | (0.0048) | (0.0050) | (0.0044) | (0.0046) | |
| Company age (log) | 0.0072 | −0.0004 | −0.0134 | −0.0236* | 0.0037 | −0.0017 |
| (0.0100) | (0.0108) | (0.0132) | (0.0140) | (0.0121) | (0.0128) | |
| Free Float | −0.0007** | −0.0010*** | −0.0005** | −0.0007*** | −0.0003 | −0.0004 |
| (0.0003) | (0.0003) | (0.0003) | (0.0003) | (0.0002) | (0.0002) | |
| Cash (% Assets) | 0.0091 | 0.0695 | −0.1304 | −0.0647 | 0.1589* | 0.1339 |
| (0.0666) | (0.0725) | (0.0900) | (0.0951) | (0.0820) | (0.0871) | |
| Market Cap (log) | 0.1022*** | 0.1037*** | 0.0766*** | 0.0738*** | 0.0809*** | 0.0822*** |
| (0.0054) | (0.0057) | (0.0069) | (0.0071) | (0.0063) | (0.0065) | |
| R&D (% Assets) | 0.1102*** | 0.1098*** | 0.1904*** | 0.1851*** | −0.0183 | −0.0077 |
| (0.0230) | (0.0232) | (0.0337) | (0.0334) | (0.0308) | (0.0306) | |
| Constant | −2.1039*** | −2.1498*** | −1.9343** | −1.8858** | −1.6077** | −1.7186** |
| (0.5254) | (0.5259) | (0.7896) | (0.7746) | (0.7214) | (0.7093) | |
| Sector Fixed Effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Country fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Observations | 6,162 | 5,533 | 7,970 | 7,211 | 7,972 | 7,210 |
| Adj R-squared | 0.187 | 0.184 | 0.110 | 0.115 | 0.186 | 0.195 |
| F-stat | 9.799 | 8.782 | 7.068 | 6.825 | 12.24 | 11.84 |
| p-value | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
| Variables | (1) | (2) | (3) | (4) | (5) | (6) |
|---|---|---|---|---|---|---|
| 3-year Beta minus 5-year Beta | 3-year Beta minus 5-year Beta | 3-year Beta + minus 5-year Beta+ | 3-year Beta + minus 5-year Beta+ | 3-year Beta- minus 5-year Beta- | 3-year Beta- minus 5-year Beta- | |
| ESGt – ESGt-4 | 0.0008*** | 0.0004 | 0.0006** | |||
| (0.0002) | (0.0003) | (0.0003) | ||||
| ESGt – ESGt-5 | 0.0005*** | 0.0003* | 0.0006*** | |||
| (0.0001) | (0.0002) | (0.0002) | ||||
| −0.0060*** | −0.0053*** | −0.0016 | −0.0003 | −0.0036** | −0.0030** | |
| (0.0012) | (0.0013) | (0.0015) | (0.0016) | (0.0014) | (0.0015) | |
| Employees | 0.0000 | 0.0000 | −0.0000*** | −0.0000** | −0.0000 | −0.0000 |
| (0.0000) | (0.0000) | (0.0000) | (0.0000) | (0.0000) | (0.0000) | |
| Quick ratio | 0.0105* | 0.0061 | −0.0010 | −0.0003 | −0.0014 | −0.0018 |
| (0.0060) | (0.0064) | (0.0079) | (0.0081) | (0.0072) | (0.0074) | |
| Debt to equity ratio | −0.0003*** | −0.0003*** | −0.0005*** | −0.0006*** | −0.0006*** | −0.0005*** |
| (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | |
| Price-to-book | 0.0109*** | 0.0092** | 0.0266*** | 0.0247*** | 0.0338*** | 0.0286*** |
| (0.0037) | (0.0039) | (0.0048) | (0.0050) | (0.0044) | (0.0046) | |
| Company age (log) | 0.0072 | −0.0004 | −0.0134 | −0.0236* | 0.0037 | −0.0017 |
| (0.0100) | (0.0108) | (0.0132) | (0.0140) | (0.0121) | (0.0128) | |
| Free Float | −0.0007** | −0.0010*** | −0.0005** | −0.0007*** | −0.0003 | −0.0004 |
| (0.0003) | (0.0003) | (0.0003) | (0.0003) | (0.0002) | (0.0002) | |
| Cash (% Assets) | 0.0091 | 0.0695 | −0.1304 | −0.0647 | 0.1589* | 0.1339 |
| (0.0666) | (0.0725) | (0.0900) | (0.0951) | (0.0820) | (0.0871) | |
| Market Cap (log) | 0.1022*** | 0.1037*** | 0.0766*** | 0.0738*** | 0.0809*** | 0.0822*** |
| (0.0054) | (0.0057) | (0.0069) | (0.0071) | (0.0063) | (0.0065) | |
| R&D (% Assets) | 0.1102*** | 0.1098*** | 0.1904*** | 0.1851*** | −0.0183 | −0.0077 |
| (0.0230) | (0.0232) | (0.0337) | (0.0334) | (0.0308) | (0.0306) | |
| Constant | −2.1039*** | −2.1498*** | −1.9343** | −1.8858** | −1.6077** | −1.7186** |
| (0.5254) | (0.5259) | (0.7896) | (0.7746) | (0.7214) | (0.7093) | |
| Sector Fixed Effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Country fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Observations | 6,162 | 5,533 | 7,970 | 7,211 | 7,972 | 7,210 |
| Adj R-squared | 0.187 | 0.184 | 0.110 | 0.115 | 0.186 | 0.195 |
| F-stat | 9.799 | 8.782 | 7.068 | 6.825 | 12.24 | 11.84 |
| 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
Note(s): This table presents the results of first-difference regressions examining the impact of changes in ESG performance on firms' systematic risk. The dependent variables are the differences between 3-year and 5-year beta estimates: overall beta (columns 1–2), upside beta (β+; columns 3–4), and downside beta (β−; columns 5–6). The key independent variables are changes in ESG scores over time, measured as the 4-year difference (ESGt – ESGt-4) and the 5-year difference (ESGt – ESGt-5). See Table 1 notes for variable definitions. Standard errors are reported in parentheses. *, **, and *** denote significance at the 10%, 5%, and 1% levels, respectively
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