Abstract

In this paper, we examine the role of environmental, social, and governance (ESG) factors in enhancing the resilience of firms during the COVID-19 pandemic. By analyzing the impact of ESG scores on stock prices during three significant events that occurred in connection with the pandemic in the United States – each with varied market responses – we aim to shed light on whether and how ESG factors affect investor trading in different firms in times of crisis. Although we find that the overall market response to COVID-specific events is significant, our findings indicate that ESG factors offer little to no explanatory power with respect to individual stock price returns. The results are robust when we employ a propensity score matching technique rather than a full-sample analysis and other robustness tests. The results suggest that investors may not prioritize a firm’s ESG performance during periods of economic turbulence, but instead focus on more traditional and shorter-term factors including a firm’s ex-ante financial health.