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Thor, Yu Chao (2025) Unravelling the ESG-volatility nexus: a panel data analysis of Malaysia market. [Dissertation (University of Nottingham only)]

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Abstract

In an era of heightened investor scrutiny and evolving market dynamics, the relationship between Environmental, Social, and Governance (ESG) performance and stock price volatility warrants in-depth investigation, especially in emerging markets such as Malaysia. This study addresses a critical gap in the Malaysian context, where research on ESG has predominantly focused on firm value and financial performance. This study aimed to investigate the relationship between ESG performance and stock price volatility in the Malaysian stock market, utilizing panel data analysis techniques on 1,800 firm-month observations. Given the rapid growth and evolving regulatory landscape of the Malaysian stock market, a deeper understanding of how ESG factors influence market risk is of paramount importance for all stakeholders.

The analysis reveals a statistically insignificant relationship between within-firm changes in ESG performance and stock price volatility in the Malaysian context. While larger firm size and higher price-to-earnings ratios emerged as significant predictors of lower volatility, the book-to-market ratio did not demonstrate a significant relationship in the panel data models. These findings suggest that, in the current Malaysian market, the risk-mitigating benefits of improved ESG performance may not be fully recognized or priced by investors, or that the within-firm variation in ESG scores is not substantial enough to be statistically detected. This study contributes to the literature by providing empirical evidence on the ESG-volatility nexus in an emerging market context.

The findings have implications for investors, companies, and policymakers in Malaysia, highlighting the need for a more nuanced understanding of the role of ESG in financial markets and emphasizing the importance of robust ESG reporting and integration practices. Future research directions are also suggested, including exploring non-linear relationships, considering interaction effects with other firm characteristics, and investigating the role of contextual factors in shaping the ESG-volatility dynamics.

Item Type:	Dissertation (University of Nottingham only)
Depositing User:	Thor, Yu
Date Deposited:	28 Jul 2025 11:49
Last Modified:	28 Jul 2025 11:49
URI:	https://eprints.nottingham.ac.uk/id/eprint/80750

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