ESG as a Double-Edged Sword in Crisis Management: Short-Term Market Reactions to Corporate Sustainability Initiatives After Disasters

This study examined the effect of the 2024 Hualien earthquake on the performance of tourism stocks in Taiwan, focusing on the interplay between disaster severity; government relief; and environmental, social, and governance (ESG) investment. An event study was conducted using a panel regression model for six listed hospitality firms with operations in Hualien or Taitung. The findings of the event study indicated that disaster-induced losses and employee casualties or dismissals had significantly positive effects on the short-term cumulative abnormal returns (CARs) of the six companies, reflecting investor expectations of prompt government aid. However, ESG investment had a significant negative effect on CARs, and it weakened the positive effects of disaster-induced losses and employee casualties or dismissals on CARs. These results suggest that although the market reacted rationally to disaster information, investor concerns regarding short-term ESG costs triggered emotional responses. This study contributes to the literature on the efficient market hypothesis, the resource-based view, and behavioral finance theory by highlighting the dual market effects of ESG investment following a disaster event. It recommends that governments implement transparent postdisaster economic support policies and that tourism firms strategically manage their ESG investments to balance sustainability with resilience.