The Impact of ESG Ratings on the Systemic Risk of European Blue-Chip Firms

There are diverging results in the literature on whether engaging ESG related activities increases or decreases financial and systemic risks of firms. In this study, we explore maintaining higher ratings reduces firms a stock market context. For purpose analyse risk indicators constituent stocks S&P Europe 350 for period January 2016–September 2020, which also partly covers COVID-19 period. We apply VAR-MGARCH model to extract volatilities correlations return shocks these stocks. Then, obtain by applying principle components approach estimated correlations. Our focus is impact indicators, while consider network centralities, performance ratios as control variables. use fixed effects OLS methods our regressions. indicate that (1) volatility stock’s returns its centrality measures main sources contributing measure, (2) with face up 7.3% less contribution exposure compared lower (3) augmented partial volatility, some ratios. When considering only period, find social governance factors have statistically significant impacts risk.