The Social Pillar of ESG: Exploring the Link Between Social Sustainability and Stock Price Synchronicity

Abstract

This study examined the association between the social sustainability aspects of environmental, social and governance (ESG) initiatives and stock price synchronicity in 146 publicly listed companies in India from 2011 to 2021. Social sustainability is gauged using indicators such as community engagement, adherence to human rights, customer loyalty, consumer health and safety protection, and employee welfare. Panel data regression with industry-year fixed effects reveals a positive association between social sustainability and stock price synchronicity. This finding suggests that the stocks of companies with strong social issue management are more aligned with market movements. The findings indicate that investors value ethical management, commitment to human rights and employee satisfaction. The insights provided by this study are vital for investors’ fund allocation decisions, highlighting the importance of workforce and supply chain diversity, fair workplace practices, human rights compliance and product integrity in informed investment decision-making. Overall, the research confirms the economic benefits that social sustainability bestows on companies and their investors.