IMPACT OF SUSTAINABILITY ON THE SHARE PRICE VOLATILITY OF FINANCIAL SERVICE COMPANIES IN SRI LANKA

Abstract

This study analyzes the impact of environmental practices, social practices and governance practices(ESG) on share price volatility (SPV) of Sri Lanka’s financial services industry from 2015 to 2023, including banking, finance, and life insurance firms. This study aims to provide a view of how ESG factors impact SPV, given the growing importance of global ESG practices. The study analyzes secondary data from the Colombo Stock Exchange and corporate annual reports using quantitative data using deductive methods. The Convenience sampling technique was used from 2015 to 2023, and data was collected from published yearly reports by Life Assurance, Finance and Banking Companies from the Colombo Stock Exchange (CSE). The evaluation revealed that ESG does not significantly impact SPV in life insurance companies. Environmental (energy) and social factors (Labor turnover) significantly impact SPV in the finance sector. In contrast, social factors (Gender diversity) significantly impact SPV in the banking sector. The study’s outcomes have practical implications for insurance sector policymakers, financial sector investors and banks’ stakeholders. As sustainability standards evolve globally, the findings emphasize areas within ESG that most impact share price stability. The findings demonstrate how vital environmental, social and governance elements, particularly diversity, contribute to increased investor confidence and market stability. This study emphasizes how crucial it is to incorporate ESG activities into business strategy. These findings offer practical advice for legislators, investors, and managers who are pursuing a match between sustainability and the share price volatility of the Sri Lankan Financial Service Sector.