ESG performance, herding behavior and stock market returns: evidence from Europe

Abstract This paper tests how financial performance indicators and combined ESG score for large-cap stocks impact on stock return. In particular, we examine market capitalization, price to book value, Sharpe ratio of firms in Europe are related their performance. We consider a panel data consisting six European countries—Portugal, Italy, Greece, Spain, France Germany—for the period 2010–2020. For Greek French firms, firm’s size tends negatively affect its returns. The investors countries (except Italy) do not jeopardize returns by investing highly scoring firms. argue that benefit ESG-scoring might lead select smaller companies with higher value ratio, as it is more likely generate Moreover, Italian susceptible issues, return seem have significant negative correlation. valuable result was confirmed conducting robustness test whole using Euronext100 index. Finally, find no evidence motivates herding our selected sample (this case Greece France), while report behavior during Covid-19 outbreak Portugal, Italy Greece.