Fuzzy–Rough Analysis of ESG Ratings and Financial and Growth Ratios on the Stock Returns of Blue-Chip Stocks in Taiwan

Abstract

This study uses fuzzy–rough analysis to investigate the influence of Environmental, Social, and Governance (ESG) ratings, along with critical financial and growth ratios, on the stock returns of blue-chip companies in Taiwan. The growing importance of ESG factors in investment decisions underscores the need to understand their impact on stock performance. By integrating the fuzzy–rough set theory, which accommodates uncertainty and imprecision in data, we analyze the complex relationships between ESG ratings, traditional financial metrics (such as ROE, return on equity), and stock returns. Our findings provide insights into how ESG considerations, alongside financial indicators, drive the returns of Taiwan’s blue-chip stocks. Three public-listed companies were evaluated using this approach, and the results are consistent with the actual stock performance. This research contributes to the field by offering a robust methodological approach to assess the nuanced effects of ESG factors on financial performance, thus aiding investors and management teams in making informed decisions.

Keywords

• environmental, social, and governance (ESG)
• financial analysis
• fundamental analysis
• rough set theory (RST)
• fuzzy set theory
• dominance-based rough set approach (DRSA)