The Impact of ESG Scores on Stock Market Performance: The Case of Greek Companies

Abstract

The global spotlight on Environmental, Social, and Governance (ESG) criteria in investment decisions has intensified, given the perceived impacts on corporate performance and investor choices. Nonetheless, Greek companies’ stock market performances have rarely been investigated based on ESG scores. This void is filled by this research investigating the relationship between ESG scores and firms’ stock market returns to 2023 for firms listed in the Athens Stock Exchange (ASE) from 2017-2023. To achieve this objective, a quantitative methodology is employed. Using ESG scores from Refinitiv’s DataStream, monthly returns from these stocks and other companies’ sizes (market capitalization), as well as their industry classification according to GICS; a sample of 29 Greek firms was considered for analysis. Our findings reveal that monthly return is not significantly influenced by ESG scores, company size and industry classifications as indicated by regression results where the R-square value is minimal. Moreover, while weak correlations have been noticed, there are meaningful differences in average returns between high and low ESG scorers according to a t-test. Unexpectedly, Model 3 of regression analysis shows a negative relationship between ESG scores and monthly return for those companies with extremely high ESG scores (>75 to 100), thereby challenging belief about immediate financial gains from strong adoption of such practices. This finding contradicts meta-analytic results that generally found positive relationships between long-term corporate financial outcomes and ESG performance.