Understanding how ESG-focused airlines reduce the impact of the COVID-19 pandemic on stock returns. (July 2022)

• Record Type: Journal Article
• Authors: Chen, Chun-Da; Su, Ching-Hui (Joan); Chen, Ming-Hsiang
• Is Part Of: Journal of air transport management. Volume 102(2022)
• Publication Date: 2022-07
• Subjects: Environmental-social-governance -- ESG -- Risk management -- Autoregressive jump intensity trend model -- COVID-19; C51 -- E44 -- G12 -- Q56; Airlines -- Management -- Periodicals; Aeronautics, Commercial -- Management -- Periodicals; 387.7068
• DOI: 10.1016/j.jairtraman.2022.102229
• Languages: English
• ISSNs: 0969-6997

Abstract

Abstract: Incorporating environmental-social-governance (ESG) into a company's operations is an innovation strategy for contemporary businesses and a countermeasure for airline companies under COVID-19's influence. This research employs an autoregressive jump intensity trend (ARJI-trend) model to analyze the effects of COVID-19 and ESG ratings on the stock performance of the U.S. airline industry. We find that the ARJI-trend model captures the short- and long-run impacts of COVID-19 and ESG on stock return dynamics. Moreover, short-run stock return volatility converges to the original equilibrium level faster when a company has a higher ESG score, implying that promoting ESG does offer a defense mechanism to airline companies and that ESG performance is suitable for integration into business operational goals. The results lay the groundwork for understanding how an ESG focus might help airline companies to suffer less of an economic/financial impact during crises such as the COVID-19 pandemic. Highlights: U.S. airlines can use environmental-social-governance (ESG) against COVID-19 crisis. Return volatility converges to the equilibrium faster if company's ESG is better. ESG characteristics can serve as a non-financial metric for airline companies. ESG engagement deserves to be integrated into company's management and operation.