Table 4 Effect of ESG on most over- and...

Table 4

Effect of ESG on most over- and undervalued firms

Panel A: Most overvalued firms–top 30%						Panel B: Most undervalued firms–bottom 30%
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF
Intercept	1.291***	1.231***	1.14***	1.509***	1.433***	−0.02	0.05	0.043	−0.127	−0.099
Intercept	[5.46]	[5.73]	[5.35]	[6.4]	[5.94]	[−0.12]	[0.33]	[0.29]	[−0.79]	[−0.61]
${MSVF}_{- 1}$	0.141***	0.141***	0.141***	0.139***	0.139***	0.113***	0.112***	0.112***	0.113***	0.112***
${MSVF}_{- 1}$	[7.73]	[7.77]	[7.8]	[7.64]	[7.64]	[8.75]	[8.66]	[8.66]	[8.76]	[8.71]
${ESG Score}_{- 1}$	−0.095					0.091
${ESG Score}_{- 1}$	[−0.59]					[0.91]
${E Score}_{- 1}$		0.001			−0.032		−0.053			−0.052
${E Score}_{- 1}$		[0.01]			[−0.26]		[−0.74]			[−0.73]
${S Score}_{- 1}$			0.212***		0.223***			−0.043		−0.042
${S Score}_{- 1}$			[2.58]		[2.71]			[−1]		[−0.96]
${G Score}_{- 1}$				−0.311***	−0.319***				0.184**	0.186**
${G Score}_{- 1}$				[−2.6]	[−2.68]				[2.53]	[2.56]
Lev	0.21***	0.212***	0.211***	0.204***	0.202***	0.049	0.046	0.047	0.052	0.051
Lev	[3.12]	[3.14]	[3.15]	[3.05]	[3.01]	[1.19]	[1.11]	[1.14]	[1.26]	[1.22]
Profitability	−0.941***	−0.932***	−0.895***	−0.948***	−0.912***	−0.992***	−0.993***	−0.995***	−0.98***	−0.98***
Profitability	[−3.35]	[−3.32]	[−3.18]	[−3.38]	[−3.25]	[−4.72]	[−4.72]	[−4.74]	[−4.67]	[−4.67]
CapEx	−0.038***	−0.039***	−0.042***	−0.04***	−0.044***	−0.036***	−0.035***	−0.035***	−0.034***	−0.033***
CapEx	[−3.59]	[−3.61]	[−3.92]	[−3.78]	[−4.05]	[−4.97]	[−4.85]	[−4.83]	[−4.76]	[−4.59]
Market-to-book	0.002	0.002	0.002	0.002	0.002	0.011***	0.011***	0.011***	0.011***	0.011***
Market-to-book	[1.62]	[1.62]	[1.63]	[1.61]	[1.62]	[2.74]	[2.78]	[2.77]	[2.62]	[2.62]
Volatility	−0.563	−0.567	−0.535	−0.526	−0.485	0.406	0.403	0.403	0.402	0.397
Volatility	[−0.65]	[−0.66]	[−0.62]	[−0.62]	[−0.57]	[1.28]	[1.27]	[1.28]	[1.26]	[1.25]
Analyst coverage	0.002	0.002	0.001	0.003	0.002	0.028***	0.028***	0.028***	0.027***	0.027***
Analyst coverage	[0.22]	[0.2]	[0.16]	[0.33]	[0.27]	[6.27]	[6.27]	[6.3]	[6.03]	[5.97]
Firm-year obs	4,534	4,534	4,534	4,534	4,534	4,139	4,139	4,139	4,139	4,139
R-square	52.22%	52.22%	52.31%	52.32%	52.42%	46.73%	46.73%	46.73%	46.84%	46.86%

Panel A: Most overvalued firms–top 30%						Panel B: Most undervalued firms–bottom 30%
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF	MSVF
Intercept	1.291***	1.231***	1.14***	1.509***	1.433***	−0.02	0.05	0.043	−0.127	−0.099
Intercept	[5.46]	[5.73]	[5.35]	[6.4]	[5.94]	[−0.12]	[0.33]	[0.29]	[−0.79]	[−0.61]
${MSVF}_{- 1}$	0.141***	0.141***	0.141***	0.139***	0.139***	0.113***	0.112***	0.112***	0.113***	0.112***
${MSVF}_{- 1}$	[7.73]	[7.77]	[7.8]	[7.64]	[7.64]	[8.75]	[8.66]	[8.66]	[8.76]	[8.71]
${ESG Score}_{- 1}$	−0.095					0.091
${ESG Score}_{- 1}$	[−0.59]					[0.91]
${E Score}_{- 1}$		0.001			−0.032		−0.053			−0.052
${E Score}_{- 1}$		[0.01]			[−0.26]		[−0.74]			[−0.73]
${S Score}_{- 1}$			0.212***		0.223***			−0.043		−0.042
${S Score}_{- 1}$			[2.58]		[2.71]			[−1]		[−0.96]
${G Score}_{- 1}$				−0.311***	−0.319***				0.184**	0.186**
${G Score}_{- 1}$				[−2.6]	[−2.68]				[2.53]	[2.56]
Lev	0.21***	0.212***	0.211***	0.204***	0.202***	0.049	0.046	0.047	0.052	0.051
Lev	[3.12]	[3.14]	[3.15]	[3.05]	[3.01]	[1.19]	[1.11]	[1.14]	[1.26]	[1.22]
Profitability	−0.941***	−0.932***	−0.895***	−0.948***	−0.912***	−0.992***	−0.993***	−0.995***	−0.98***	−0.98***
Profitability	[−3.35]	[−3.32]	[−3.18]	[−3.38]	[−3.25]	[−4.72]	[−4.72]	[−4.74]	[−4.67]	[−4.67]
CapEx	−0.038***	−0.039***	−0.042***	−0.04***	−0.044***	−0.036***	−0.035***	−0.035***	−0.034***	−0.033***
CapEx	[−3.59]	[−3.61]	[−3.92]	[−3.78]	[−4.05]	[−4.97]	[−4.85]	[−4.83]	[−4.76]	[−4.59]
Market-to-book	0.002	0.002	0.002	0.002	0.002	0.011***	0.011***	0.011***	0.011***	0.011***
Market-to-book	[1.62]	[1.62]	[1.63]	[1.61]	[1.62]	[2.74]	[2.78]	[2.77]	[2.62]	[2.62]
Volatility	−0.563	−0.567	−0.535	−0.526	−0.485	0.406	0.403	0.403	0.402	0.397
Volatility	[−0.65]	[−0.66]	[−0.62]	[−0.62]	[−0.57]	[1.28]	[1.27]	[1.28]	[1.26]	[1.25]
Analyst coverage	0.002	0.002	0.001	0.003	0.002	0.028***	0.028***	0.028***	0.027***	0.027***
Analyst coverage	[0.22]	[0.2]	[0.16]	[0.33]	[0.27]	[6.27]	[6.27]	[6.3]	[6.03]	[5.97]
Firm-year obs	4,534	4,534	4,534	4,534	4,534	4,139	4,139	4,139	4,139	4,139
R-square	52.22%	52.22%	52.31%	52.32%	52.42%	46.73%	46.73%	46.73%	46.84%	46.86%

Note(s): This table presents the fixed effects regression results of stock misvaluation (MSVF) on the lagged ESG score, as well as on the individual E, S, and G scores, both separately and jointly, for over- and undervalued stocks. Columns (1) to (5) of Panel A represent the analyses for overvalued stocks, which are the top 30% of stocks according to the stock misvaluation measure. Columns (6) to (10) of Panel B represent the analyses for undervalued stocks, which are the bottom 30% of stocks according to the stock misvaluation measure. Standard errors are clustered at the firm level. The t-statistics are reported in the parentheses. ***, **, * denote 1%, 5%, 10% significance levels

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