Financial system

Engineering

Stock (firearms)

Archaeology

Economics

Market liquidity

Business

Corporate governance

Mechanical engineering

Geography

Monetary economics

Financial economics

Liquidity premium

Finance

Liquidity crisis

Journal of International Financial Markets Institutions and Money

We examine the effect of environment, social, and governance (ESG) score on stock returns in the United Kingdom (UK). Consistent with Hong and Kacperczyk (2009), Bolton and Kacperczyk (2021), and Pedersen et al. (2021), firms with lower ESG earn higher returns than those with higher ESG. The environment and social premiums are more pronounced than the ESG premium. To understand the premium, we show that the ESG premium is significant for low liquidity securities but not for high liquidity securities, which suggests that ESG is likely associated with stock liquidity.

ESG, liquidity, and stock returns