Resilience is at the forefront in companies striving to build immunity against adverse shocks.
Insurance through ESG engagement is the focus of much research, yet it has thus far been dominated by a somewhat static approach. We embrace a longitudinal approach by accounting for two aspects of a firm’s ESG engagement: its degree of regularity over time (ESG consistency), and the extent to which each firm reallocates its ESG engagement across pillars (ESG adaptability). We examine how these characteristics of the ESG strategy affect firm resilience, split into two dimensions: stability (the maximum economic loss suffered following the shock), and flexibility (time to recovery). Using a sample of U.S. listed firms, our empirical context is the COVID-19 shock.
Our evidence suggests that ESG consistency and ESG adaptability improve resilience stability, but that they have no significant impact on the flexibility dimension. We further find that such dynamic aspects of ESG become more important vis-à-vis strengthening the resilience of poorer ESG-engaged companies, for which signalling the sincerity of their ESG actions plays a crucial role in prompting stakeholder support.
Overall, this evidence is consistent with the view that ESG engagement is a long-term commitment in terms of providing a pay-off for firms.
Pilar Velasco is Associate Professor at the Department of Finance and Accounting, Universidad de Valladolid, Spain. She had academic positions also at the University of León (Spain), Autónoma University of Madrid (Spain), University of Alcalá, Madrid (Spain) and the Public University of Navarra, Pamplona (Spain).
Her research are about options, diversification, capital structure, corporate governance and ESG. She published in several relevant journals such as Journal of Corporate Finance, Journal of Banking and Finance, Journal of Business Research or Long Range Planning.
The seminar will be held in English.
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