First Faculty Advisor
Second Faculty Advisor
ESG; firm value; stock prices; portfolio returns; sin firms
CC-BY-NC-ND; CC-BY; CC-BY-SA; CC-BY-ND; CC-BY-NC-SA; CC-BY-NC
In this study, we examine the impact of ESG on stock returns and portfolio returns for sin stocks. The relationship between ESG and stock prices has been a topic of interest for research in recent years with the increasing emphasis on ESG in society. The present study analyzes the ESG scores for nine specific sin stock industries: tobacco, gambling, alcohol, adult entertainment, firearm, military, nuclear power, bioengineering, and oil and gas. This study is conducted through the use of statistical analysis with data collected from COMPUSTAT, CRSP, and MSCI. Our results reveal that ESG is negatively correlated with sin firm stock prices. The low ESG portfolio outperformed the high ESG portfolio, but the low ESG portfolio did not outperform the market. However, this relationship only held for the first half of the period being tested. This study is for management and investor use alike, with the goal of determining whether ESG performance in sin firms enhances stock prices and portfolio returns. This study fills a gap in the literature specifically examining the effects of ESG on sin stock returns.