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. 2022 Jul:102:102229.
doi: 10.1016/j.jairtraman.2022.102229. Epub 2022 May 16.

Understanding how ESG-focused airlines reduce the impact of the COVID-19 pandemic on stock returns

Chun-Da Chen  1 , Ching-Hui Joan Su  2 , Ming-Hsiang Chen  3   4   5
Affiliations

Understanding how ESG-focused airlines reduce the impact of the COVID-19 pandemic on stock returns

Chun-Da Chen et al. J Air Transp Manag. 2022 Jul.

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.

Keywords: Autoregressive jump intensity trend model; COVID-19; ESG; Environmental-social-governance; Risk management.

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Figures

Fig. 1a
Fig. 1a
Daily stock prices of DAL, AAL, and LUV: July 2019 to December 2020.
Fig. 1b
Fig. 1b
Daily stock returns of DAL, AAL, and UAL: July 2019 to December 2020.
Fig. 2
Fig. 2
Conditional jump intensity of model 2 for DAL, AAL, UAL, and LUV: July 2019 to September 2020.
Appendix Fig. 1
Appendix Fig. 1
ACF/PACF plots.
See this image and copyright information in PMC

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