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Tarmuji, Indarawati, Ruhanita Maelah, and Nor Habibah Tarmuji. "The Impact of Environmental, Social and Governance Practices (ESG) on Economic Performance: Evidence from ESG Score." International Journal of Trade, Economics and Finance 7, no. 3 (June 2016): 67–74. http://dx.doi.org/10.18178/ijtef.2016.7.3.501.
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Bhattacharya, Sonali, and Dipasha Sharma. "Do environment, social and governance performance impact credit ratings: a study from India." International Journal of Ethics and Systems 35, no. 3 (August 12, 2019): 466–84. http://dx.doi.org/10.1108/ijoes-09-2018-0130.
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Purpose The purpose of this study is to determine the impact of environment, social and governance (ESG) disclosure on credit ratings of companies in India. Design/methodology/approach Firms under study are listed on the Bombay Stock Exchange (BSE) 500 and represent almost 93 per cent of the total market capitalization on BSE. This study considers a sample of 122 firms from a population of 500 to examine the relationship between ESG scores and Credit Rating. The scope of this study is confined to those firms listed on the S&P BSE 500 which have made ESG disclosures and were rated by various credit rating agencies like Crisil, ICRA and CARE. Data were sourced from Bloomberg. Ratings were given in ascending order. In the first model, credit rating was used as predicted variable; ESG score as predictor variable and market capitalization, net debt to equity, and total debt to asset as control considering the ordered nature of dependent variable in the study, ordered logistic regression was applied. It was repeated taking individual scores on environment rating, social rating and governance rating as predictors. The authors further segregated the 122 selected firms into large, medium and low capital firms and assessed separate logistic regression models taking credit rating as the predicted variable and overall ESG score as the predictor. Findings It was found that overall ESG performance and performance of individual components (environment, social and financial variables such as market capitalization, and debt to equity ratio) had significant positive indicators of creditworthiness as measured through credit rating. Governance score had a positive and insignificant relation with credit rating. Market capitalization was observed to have significant direct relationship with credit worthiness. On the other hand, number of independent directors in companies showed significant inverse relationship with creditworthiness. ESG significantly impacted credit rating in the desired direction only for small- and middle-level firms; for large firms which already had higher credit rating, ESG showed no effect. It was also found that credit rating itself determined significantly the extent of overall ESG reporting and disclosure of its components. Originality/value This is unique study that covers the aspects of ESG reports and its impact on credit rating.
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Engelhardt, Nils, Jens Ekkenga, and Peter Posch. "ESG Ratings and Stock Performance during the COVID-19 Crisis." Sustainability 13, no. 13 (June 25, 2021): 7133. http://dx.doi.org/10.3390/su13137133.
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We investigate the association between Environmental, Social, and Governance (ESG) ratings and stock performance during the COVID-19 crisis. Although there is mixed evidence in the literature whether ESG is valuable in times of crisis, we find high ESG-rated European firms to be associated with higher abnormal returns and lower stock volatility. After decomposing ESG into its separate components, we find the social score to be the predominant driver of our results. Further, we argue that ESG is value-enhancing in low-trust countries, and in countries with poorer security regulations and where lower disclosure standards prevail.
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La Torre, Mario, Fabiomassimo Mango, Arturo Cafaro, and Sabrina Leo. "Does the ESG Index Affect Stock Return? Evidence from the Eurostoxx50." Sustainability 12, no. 16 (August 7, 2020): 6387. http://dx.doi.org/10.3390/su12166387.
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Recent findings provide evidence that companies highly rated in terms of Environmental, Social, and Governance (ESG) score report higher excess returns and lower volatility, this being supported by the assumption that ESG factors are considered, by market agents, as a good proxy for firms’ financial soundness. The aim of this paper is to investigate how ESG components affect stock returns. We use a two-step methodology to analyze the performance of companies included in the Eurostoxx50 index over the 2010–2018 period according to their ESG score. To classify companies in terms of ESG commitments, we combine several ESG indicators (quantitative ratings, scorings and qualitative-opinions) collected on a monthly basis. Our results do not support previous evidence; the Eurostoxx50 companies’ performance does not seem to be affected by their efforts in terms of ESG commitments.
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Kim, Sang, and Zhichuan (Frank) Li. "Understanding the Impact of ESG Practices in Corporate Finance." Sustainability 13, no. 7 (March 27, 2021): 3746. http://dx.doi.org/10.3390/su13073746.
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This study examines the relationship between environmental, social, and governance (ESG) factors and corporate financial performance. Specifically, we study various individual ESG categories, both ESG strengths and concerns, and aggregate ESG factor and their impact on corporate financial performance including profitability and financial risk. We find a positive effect of ESG factors on corporate profitability, and the effect is more pronounced for larger firms. Among different ESG categories, corporate governance has the most significant impact, particularly for firms with weak governance. We also find that ESG variables generally have a positive influence on credit rating. In particular, the social factor has the most significant impact on credit rating, while environmental score surprisingly has a negative effect. Overall, this research provides a rationale for ESG integration in the context of investment management and portfolio construction to maximize value and minimize risk.
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Atan, Ruhaya, Md Mahmudul Alam, Jamaliah Said, and Mohamed Zamri. "The impacts of environmental, social, and governance factors on firm performance." Management of Environmental Quality: An International Journal 29, no. 2 (March 12, 2018): 182–94. http://dx.doi.org/10.1108/meq-03-2017-0033.
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Purpose The ESG factor, which consists of environmental, social, and governance factors, represents the non-financial performance of a company. United Nations Principles for Responsible Investment invites investors to consider ESG issues when evaluating the performance of any company. Moreover, nowadays, the contribution of corporations towards sustainable development is a major concern of investors, creditors, government, and other environmental agencies. Therefore, the purpose of this paper is to examine the impact of ESG factors on the performance of Malaysian public-limited companies (PLC) in terms of profitability, firm value, and cost of capital. Design/methodology/approach A total of 54 companies are selected from Bloomberg’s ESG database that has complete ESG and financial data from 2010 to 2013. This study conducted panel data regressions such as the pooled OLS, fixed effect, and random effect. Findings Based on the regression results, there is no significant relationship between individual and combined factors of ESG and firm profitability (i.e. ROE) as well as firm value (i.e. Tobin’s Q). Moreover, individually, none of the factors of ESG is significant with the cost of capital (weighted average cost of capital, WACC), but the combined score of ESG positively and significantly influences the cost of capital (WACC) of a company. Practical implications As this is a new study on Malaysia, the findings of this study will be useful to investors, SRI analysts, policy makers, and other related agencies. Originality/value To the best of the authors’ knowledge, this study is among the first empirical study to examine the impact of ESG factors on the performance of Malaysian PLC in terms of profitability, firm value, and cost of capital.
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Liang, Hao, and Luc Renneboog. "The global sustainability footprint of sovereign wealth funds." Oxford Review of Economic Policy 36, no. 2 (2020): 380–426. http://dx.doi.org/10.1093/oxrep/graa010.
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Abstract With the emergence of sovereign wealth funds (SWFs) around the world managing equity of over $8 trillion, their impact on the corporate landscape and social welfare is being scrutinized. This study investigates whether and how SWFs incorporate environmental, social, and governance (ESG) considerations in their investment decisions in publicly listed corporations, as well as the subsequent evolution of target firms’ ESG performance. We find that SWF funds do consider the level of past ESG performance as well as recent ESG score improvement when taking ownership stakes in listed companies. These results are driven by the SWF funds that do have an explicit or implicit ESG policy and are most transparent, and by SWF originating from developed countries and countries with civil law origins. In relation to engagement, we find by means of two natural experiments with exogenous shocks (the Deepwater Horizon catastrophe and Volkwagen diesel scandal) that the ESG scores do not change significantly more for firms in which SWFs have ownership stakes. This potentially suggests that SWFs in general do not actively steer their target firms towards higher levels of ESG.
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Sahut, Jean-Michel, and Hélène Pasquini-Descomps. "ESG Impact on Market Performance of Firms: International Evidence." Management international 19, no. 2 (May 7, 2015): 40–63. http://dx.doi.org/10.7202/1030386ar.
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This study investigates how news-based scores in ESG (Environmental, Social, and corporate Governance) may have influenced the monthly stocks’ market return in Switzerland, the US, and the UK during the 2007–2011 period. We find that the variation of the overall ESG score is only significant in the UK. We also show that the changes in sub-category ratings of GRI (namely, governance, economic, environment, labor, human rights, society, and products) exhibit a small but significant impact on the stock’s performance during limited periods or on limited sectors, which varies among the countries. Finally, our non-parametric kernel regression highlights that the function linking a stock’s performance to its ESG-score changes is probably non-linear.
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Giannarakis, Grigoris, George Konteos, and Nikolaos Sariannidis. "Financial, governance and environmental determinants of corporate social responsible disclosure." Management Decision 52, no. 10 (November 11, 2014): 1928–51. http://dx.doi.org/10.1108/md-05-2014-0296.
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Purpose – The purpose of this paper is to investigate the vital determinants on the extent of corporate social responsibility (CSR) disclosure in a US context. The selected variables are CEO duality, the presence of women in the board, greenhouse gas (GHG) emissions, emission reduction initiatives, company's risk premium, financial leverage and industry's profile. Design/methodology/approach – The environmental, social and governance (ESG) disclosure score is used as a proxy for the extent of CSR disclosure calculated by Bloomberg. The influence of plausible variables on the ESG disclosure score and its sub-categories was examined by using the least squares dummy variable model (LSDV) incorporating 100 companies listed on Standard & Poor's 500 Index for the period 2009-2012. Findings – The results show that the emission reduction initiatives and GHG emissions influence positively the extent of ESG score. In addition, slight differences exist concerning the determinants of different types of disclosures. Furthermore, it is illustrated that a company's industrial profile seems to have differences among the extent of the different types of disclosure. Research limitations/implications – The sample of companies is based on the US companies incorporating only large-sized ones. Originality/value – The study extends previous studies with the inclusion of both traditional and innovative determinants of the CSR disclosure in USA taking into account four years of corporate data. A third party rating approach was adopted in order to calculate the extent of CSR disclosure. Finally, both the shareholders’ and the investors’ attitudes in relation to CSR disclosure are presented.
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Kang, Won, and Mookwon Jung. "Effect of ESG Activities and Firm’s Financial Characteristics." Korean Journal of Financial Studies 49, no. 5 (October 31, 2020): 681–707. http://dx.doi.org/10.26845/kjfs.2020.10.49.5.681.
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In this study, we examine how environmental, social, and corporate governance (ESG) activities differently affect firm value depending on a firm’s financial characteristics. The qualitative aspect of ESG activities, which is not reflected in ESG scores, is valued in the market based on a firm’s financial characteristics and is the motivation for the present study. We conducted empirical analyses employing multiple ESG score sets obtained from two different ESG evaluation institutions for the recent four-year period. We found that ESG performance has a positive effect on firm value, though some variations occur across the ESG element types, which is consistent with previous results. The positive effect is more pronounced in firms with higher profitability or foreign ownership, which implies that ESG activities can have a greater impact on firms with a strong financial ability to sustain these activities or those with disciplined foreign investors to monitor transparency. These results are robust to the two-stage least squares analysis to capture the reverse causality between ESG performance and financial variables. Our findings suggest that to maximize the effect of ESG activities, firms need to build market confidence through financial efforts, such as enhancing profitability and attracting foreign investments.
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Yeung, Shirley, and David Chui. "Commitment for sustainable development and UN initiatives - returns and performance shown." Corporate Ownership and Control 15 (2017): 360–69. http://dx.doi.org/10.22495/cocv15i1c2p5.
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The purpose of this paper is to reflect the commitment of organizations in ESR reporting and explore ways to integrate ISO 26000 CSR Guidelines, ESG Reporting, and UN Sustainable Development Goals for innovations in CSR performance, focusing participation of women in the workforce and CSR training provided to employees. Based on quantitative ESG data* from Bloomberg database on the selected organizations’ qualitative information of China and Germany that are signatory member of UN Global Compact, it is observed that when comparing China and Germany, Germany in general has a higher ESG disclosure score, higher level of women participation, and a longer ESG reporting practice. In order to increase commitment of CSR and UN SDG, complying with ESR reporting guidelines is not sufficient. It is suggested to integrate the 17 SD Goals of United Nations to empower women with decent jobs for economic and social impacts, to link up ISO 26000 CSR guidelines to inclusion. This research is managerially and strategically relevant and topical. However, more practical innovations and sustainability-related education and business practices from the social perspective are required not only to improve the ESR disclosure score and economic impacts but also to generate a mindset of sustainability.
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Qureshi, Muhammad Azeem, Minhas Akbar, Ahsan Akbar, and Petra Poulova. "Do ESG Endeavors Assist Firms in Achieving Superior Financial Performance? A Case of 100 Best Corporate Citizens." SAGE Open 11, no. 2 (April 2021): 215824402110215. http://dx.doi.org/10.1177/21582440211021598.
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Increasing interest in sustainability performance (environmental, social, and governance pillar performance [ESGP]) and corporate financial performance (CFP) is noteworthy. However, we do not find any all-inclusive study that employs both individual components of environmental, social, and governance pillars (ESG) as well as the cumulative ESG score on both the accounting and market performance of firms. Furthermore, we do not find any study that puts forth “best practices” in the ESGP-CFP nexus. Therefore, our study intends to provide additional empirical evidence in this debate by including all three pillars of ESG as well as the overall ESG score by employing a unique sample of “100 best corporate citizens” in the United States declared by 3BL Media during 2009 to 2018. For this purpose, we employ panel vector auto regression (PVAR) that allows us to overcome the methodological challenges faced by some earlier empirical studies. The core findings are: (a) for market-based financial performance (market-to-book ratio [MTB] and Tobin’s Q), our results only confirm ESGP–CFP relationship and suggest that sustained higher commitment to the environmental pillar, consistent socially responsible conduct, and rationalized governance mechanism of the sampled firms are perceived value additive by the market players. (b) For accounting-based financial performance (return on equity [ROE] and return on assets [ROA]), we find a mix of ESGP–CFP and CFP–ESGP relationship for ROE only. Furthermore, factor error variance decomposition (FEVD) analysis reveals that environmental, social, and overall ESG performances of the sampled firms are quite good predictors of future CFP in the market. These findings assert that actively pursuing ESG endeavors can assist firms in achieving superior financial performance.
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Hassani, Hossein, Stephan Unger, and Mohammad Reza Entezarian. "Information Content Measurement of ESG Factors via Entropy and Its Impact on Society and Security." Information 12, no. 10 (September 23, 2021): 391. http://dx.doi.org/10.3390/info12100391.
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We conducted a singular and sectoral vulnerability assessment of ESG factors of Dow-30-listed companies by applying the entropy weight method and analyzing each ESG factor’s information contribution to the overall ESG disclosure score. By reducing information entropy information, weaknesses in the structure of a socio-technological system can be identified and improved. The relative information gain of each indicator improves proportionally to the reduction in entropy. The social pillar contains the most crucial information, followed by the environmental and governance pillars, relative to each other. The difference between the social and economic pillars was found to be statistically not significant, while the differences between the social pillar, respective to the economic and governance pillars were statistically significant. This suggests noisy information content of the governance pillar, indicating improvement potential in governance messaging. Moreover, we found that companies with lean and flexible governance structures are more likely to convey information content better. We also discuss the impact of ESG measures on society and security.
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Tamimi, Nabil, and Rose Sebastianelli. "Transparency among S&P 500 companies: an analysis of ESG disclosure scores." Management Decision 55, no. 8 (September 18, 2017): 1660–80. http://dx.doi.org/10.1108/md-01-2017-0018.
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Purpose The purpose of this paper is to explore the state of S&P 500 companies’ transparency by analyzing their Bloomberg ESG (Environmental-Social-Governance) disclosure scores. Additionally, the effects of industry sector, firm size, and governance practices on transparency are examined. Design/methodology/approach Data were retrieved from Bloomberg using the financial analysis environmental, social and governance function for companies comprising the S&P 500 index. Descriptive statistics are provided on each of the three components separately (ESG). Nonparametric procedures are used to test for significant differences in transparency within each of these three areas based on industry sector. Additionally, nonparametric tests are used to determine the impact of firm size (market capitalization) and governance factors (board size, board gender diversity, chief executive officer (CEO) duality, and linking executive compensation to ESG disclosure) on the composite ESG score. Findings Descriptive statistics reveal that S&P 500 companies differ in their level of disclosure across the three areas (ESG). The highest level of transparency is found on Governance and the lowest on Environmental. Moreover, there is much variability in the percentage of S&P 500 companies disclosing information about specific Social policies (e.g. child labor). Significant differences in transparency on both the Social and Governance dimensions are found between certain industry sectors. The results also reveal that large-cap companies have significantly higher ESG disclosure scores than mid-cap companies and that governance factors impact ESG disclosure. Significantly, higher ESG disclosure scores are observed for S&P 500 firms with larger boards of directors, with boards that are more gender diverse, that allow CEO duality, and that link executive compensation to ESG scores. Originality/value This study focuses on corporate transparency through a granular analysis of ESG disclosure scores when most other studies have been primarily conducted at the macro level. Stakeholders, analysts, and shareholders are increasingly scrutinizing firms’ sustainability disclosures in their assessment of management quality, as it reflects on the practices/policies that are employed to improve firms’ environmental and social footprints.
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Mihaiu, Diana Marieta, Radu-Alexandru Șerban, Alin Opreana, Mihai Țichindelean, Vasile Brătian, and Liliana Barbu. "The Impact of Mergers and Acquisitions and Sustainability on Company Performance in the Pharmaceutical Sector." Sustainability 13, no. 12 (June 8, 2021): 6525. http://dx.doi.org/10.3390/su13126525.
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The primary goal of this study was to determine the impact of mergers and acquisitions (M&A) and the environmental, social, and governance (ESG) sustainability scores of companies. In this regard, efforts to measure and analyze the evolution of a company’s performance, taking into account financial and non-financial measures using a score function, are adapted to the pharmaceutical sector. The sample consisted of 100 leading pharmaceutical companies, ranked by stock market capitalization, who registered 30% (n = 492) of the total M&A transactions over the study period (2010–2020). There was a direct and positive link between the M&A process and the evolution of company performance. The ESG score, as an indicator for measuring sustainability, has a positive and direct impact on company performance, indicating that a high ESG score determines an increase in company performance. A similar impact is identified for companies involved in M&A processes, meaning that companies in the pharmaceutical sector tend to register a performance improvement.
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Del Giudice, Alfonso, and Silvia Rigamonti. "Does Audit Improve the Quality of ESG Scores? Evidence from Corporate Misconduct." Sustainability 12, no. 14 (July 15, 2020): 5670. http://dx.doi.org/10.3390/su12145670.
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One of the main controversial aspects of sustainability metrics relies on the accuracy, transparency, and reliability of the information at the basis of environmental, social and governance (ESG) scores. This paper investigates whether firms that have their ESG reporting audited by independent firms exhibit a higher quality of ESG scores. We performed an analysis investigating the change in ESG scores following the unveiling of a corporate misconduct. We documented that, overall, no significant ESG score adjustment occurs after the scandal becomes public, thus, implying that rating agencies provide an accurate interpretation of the firm’s sustainability. However, our results differed when we distinguished between audited and unaudited reports. Firms whose reports are audited by third parties did not exhibit significant changes in their scores after a scandal, whereas for companies whose reports are not audited, we detected a worsening of the ESG scores that are statistically significant. Our findings were also confirmed in a multivariate analysis. Overall, our results suggest that the reliability of ESG scores can benefit from the auditing of sustainability reporting by third parties, which has an assurance effect on the quality of the company’s ESG information.
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Gunawan, Reinandus Aditya, and Valencia Priska. "ANALISIS PENGARUH SUSTAINABILITY TERHADAP RETURN SAHAM PERUSAHAAN SEKTOR INDUSTRI PERTAMBANGAN BATU BARA." JURNAL AKUNTANSI DAN BISNIS : Jurnal Program Studi Akuntansi 4, no. 2 (November 21, 2018): 1. http://dx.doi.org/10.31289/jab.v4i2.1978.
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<p><em>Sustainability </em>adalah sebuah cara bagaimana sebuah perusahaan meminimalkan kerusakan yang terjadi yang disebabkan oleh perusahaan terhadap lingkungan, sosial dan apakah sebuah perusahaan memiliki sebuah tata kelola perusahaan yang baik. Sektor industri batu bara dimana di dalam proses produksinya sangat berkaitan dengan lingkungan dan sosial tentunya sangat berkaitan dengan <em>sustainability</em>. <em>Sustainability </em>dapat diukur dengan menggunakan <em>ESG Score </em>yaitu skor <em>environment, social </em>dan <em>governance </em>secara umum dan secara khusus dengan secara khusus dibagi lagi menjadi, <em>Resource Use Score, Emissions Score, Environmental Innovation Score, Workforce Score, Human Rights Score, Community Score, Product Responsibility Score, Management Score, Shareholders Score</em>, dan <em>CSR Strategy Score</em>. Penelitian ini mencari pengaruh antara <em>ESG Score </em>dengan <em>return saham </em>dari perusahaan tersebut. Metode yang digunakan adalah dengan menggunakan data panel. Hasilnya adalah variabel <em>management</em> dan <em>csr strategy</em> berpengaruh secara signifikan terhadap perubahan <em>return saham </em>perusahaan dalam sektor industri <em>coal mining</em><em>.</em></p>Kata Kunci: <em>sustainability, coal mining, esg score, return </em>saham
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Zumente, Ilze, and Nataļja Lāce. "ESG Rating—Necessity for the Investor or the Company?" Sustainability 13, no. 16 (August 10, 2021): 8940. http://dx.doi.org/10.3390/su13168940.
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With the rise of responsible investments, the demand for non-financial data has multiplied. Even for those companies who have obtained an environmental, social and governance (ESG) assessment, the scores issued by rating agencies tend to depict differing pictures of the sustainability performance. First, this article explores the approaches employed by different ESG rating providers. Next, it aims to evaluate the availability and correlation of multiple third-party ratings awarded to companies that are stock-listed on European stock exchanges. Finally, an independent t-test analysis is performed to explore whether the lack of ESG rating availability in the region of Central and Eastern Europe (CEE) has a negative impact on stock’s trading volume and returns. The results suggest substantial divergence in the ratings awarded to the European companies; therefore, companies should pay attention to the methodologies and practices applied by differing agencies to make sure that their efforts are appropriately evaluated, while investors should bear in mind the correlation coefficient of only 0.58 between the two most popular ESG ratings. The analysis on CEE companies shows significant differences in the trading volume between companies that have been awarded an ESG rating and those that have not, implying the importance of the ESG score not only for the investors but also for the companies.
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Brühl, Volker. "Mehr Nachhaltigkeit im deutschen Leitindex DAX." Wirtschaftsdienst 100, no. 12 (December 2020): 952–57. http://dx.doi.org/10.1007/s10273-020-2803-3.
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ZusammenfassungIm Rahmen der Aufarbeitung des Wirecard-Skandals wird auch eine Änderung der Kriterien zur Aufnahme in den deutschen Leitindex DAX diskutiert. Die bislang von der Deutschen Börse vorgesehenen Maßnahmen gehen in die richtige Richtung, sind aber nicht weitreichend genug. Es bedarf eines deutlichen Zeichens, dass sich künftig nur solche Unternehmen für den DAX qualifizieren können, die ein zumindest befriedigendes Maß an Nachhaltigkeit gemessen durch einen ESG-Risk-Score (Environment, Social, Governance) in ihrer Geschäftstätigkeit erreichen. Eine Simulation verdeutlicht, dass nach ESG-Kriterien seit langem kritisch betrachtete Unternehmen dem DAX nicht mehr angehören würden. Damit könnte mehr Kapital in nachhaltig wirtschaftende Unternehmen und Sektoren fließen.
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García, González-Bueno, Oliver, and Riley. "Selecting Socially Responsible Portfolios: A Fuzzy Multicriteria Approach." Sustainability 11, no. 9 (April 28, 2019): 2496. http://dx.doi.org/10.3390/su11092496.
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We propose a multi-objective approach for portfolio selection, which allows investors to consider not only return and downside risk criteria but also to include environmental, social and governance (ESG) scores in the investment decision-making process. Owing to the uncertain environment of portfolio selection, the return and ESG score of each asset are considered as independent L-R power fuzzy variables. To make the model more realistic, we take budget, floor ceiling and cardinality constraints into account. In order to select the optimal portfolio along the efficient frontier, we apply the Sortino ratio in a credibilistic environment. The subsequent empirical application uses a data set from Bloomberg's ESG Data in combination with US Dow Jones Industrial Average data. The experimental results show that the proposed model offers promising results for socially responsible investors seeking ethical and sustainability goals beyond the return-risk trade-off and its ability to beat the benchmark.
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Manita, Riadh, Maria Giuseppina Bruna, Rey Dang, and L’Hocine Houanti. "Board gender diversity and ESG disclosure: evidence from the USA." Journal of Applied Accounting Research 19, no. 2 (May 14, 2018): 206–24. http://dx.doi.org/10.1108/jaar-01-2017-0024.
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PurposeThe purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings.Design/methodology/approachThe environmental, social and governance (ESG) disclosure score provided by Bloomberg is used as a proxy for the extent of corporate social responsibility (CSR). The empirical analysis is based on a sample of 379 firms that made up the Standard & Poor’s 500 Index over the period 2010-2015. In order to take into account the endogeneity problem between board gender diversity and ESG disclosure, a fixed effect model with lagged board variables is used.FindingsTwo main results arise from this study. First, no significant relationship is found between board gender diversity and ESG disclosure. Second, the evidence also partially confirms critical mass theory, as below three female directors the relationship between board gender diversity and ESG disclosure is not statistically significant. However, beyond that, no significant relationship was found.Research limitations/implicationsReasonable theoretical arguments drawn from stakeholder theory suggest that board gender diversity may have a positive effect on ESG disclosure. The empirical evidence presented neither supports, nor denies stakeholder theory. However, the results may be improved by enlarging the frontiers of this research in time and space, increasing the perimeter of qualitative data integrated in this investigation.Practical implicationsThis paper offers theoretical and empirical arguments for the feminization of corporate boards, not only in the name of equality between women and men and organizational justice, but also in the light of organizational performance (examined through the prism of governance). Transparency, analyzed using the proxy of ESG disclosure, is strongly and positively correlated with a feminization of boards, if the proportion of women is significant and sufficient to be able to prevent and surpass the “invisibilization” phenomenon, which is based on the marginalization of passive ultra-minorities, reduction to silence, marginalization (disqualification of women voice or exit strategy), assimilation or the endorsement of stigma.Originality/valueFirst, this makes a theoretical contribution to the diversity and governance literature by examining the effect of WOCB on ESG disclosure through the stakeholder theory (Freeman, 2010). Second, the authors contribute to the CSR literature (cf. Byron and Post, 2016) by documenting specifically the effect of board gender diversity on CSR disclosures through ESG. Indeed, ESG research mainly concentrates on firm financial performance (Galbreath, 2013). No study has examined the relationship between WOCB and ESG disclosure. Finally, from an empirical standpoint, an FE model with lagged board variables (Liuet al., 2014) is used to fully address the endogeneity problems in the relationship between WOCB and ESG disclosure that may occur because of differences in unobservable characteristics across firms or reverse causality (Boulouta, 2013).
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Salvi, Antonio, Emanuele Doronzo, Anastasia Giakoumelou, and Felice Petruzzella. "CSR and Corporate Financial Performance: An Inter-Sectorial Analysis." International Journal of Business and Management 14, no. 11 (October 19, 2019): 193. http://dx.doi.org/10.5539/ijbm.v14n11p193.
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This study examines the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP), shedding new light on the lack of academic consensus and prevailing failure to deal with endogeneity in data. To this purpose, the authors recalculate ESG performance starting from the four pillars (economic, environmental, governance and social) provided by Thomson Reuters’ Asset4 database, able to determine a firm’s CSP. We adjust each ESG pillar score accounting for the firm’s sector, size and headquarter geographic area. We empirically test the relationship with a Generalized Method of Moments approach (GMM) in order to tackle the widely disputed endogeneity issues arising in this type of datasets.
Results highlight a positive relationship between CSR, as measured in a tailored manner in this study, and corporate financial performance.
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P., Fahad, and Showkat Ahmad Busru. "CSR disclosure and firm performance: evidence from an emerging market." Corporate Governance: The International Journal of Business in Society 21, no. 4 (January 25, 2021): 553–68. http://dx.doi.org/10.1108/cg-05-2020-0201.
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Purpose This study aims to investigate the effect of corporate social responsibility (CSR) disclosure on firm performance, considering both firm profitability and firm value in an emerging market, India. Design/methodology/approach The study examines the effect of CSR disclosure on firm performance using panel regressions for the final sample that consists of 386 companies listed in the BSE 500 index, India. It covers all major players in the capital market for ten years from 2007–2016. Findings The result shows a trend toward the negative effect of CSR disclosure on firm profitability and firm value in India; this negative effect is mainly influenced by environmental disclosure score and social disclosure score. An adverse effect of firm profitability and firm value on CSR disclosure is also observed to underline the inverse relationship. Practical implications The study provides implications to consumers, investors, managers and policymakers. Firstly, consumers have to be more aware of CSR initiatives of companies, and they should support those companies to do more. Secondly, investors can use the ESG disclosure score as a signal for the level of CSR activities, which negatively affects firm performance. Thirdly, managers have to consider CSR more seriously and spend CSR amount wisely after proper research and not just to meet the mandatory limit. In addition, managers have to take necessary actions to make the public aware of the CSR activities of the company to gain an advantage in the future. Finally, policymakers have to give more emphasis on the promotion of CSR activities to reach the ultimate consumers who lie in the remote areas of the country, and more awareness has to be given to them regarding CSR activities. Originality/value The findings contribute to the literature by providing insights on CSR disclosure and firm performance relationship in India, an emerging market with increasing international attention where such studies are scant and less clear, especially after the amendments in the Companies Act, 2013. Furthermore, the measurement of CSR disclosure using environmental, social and governance (ESG) score is novel in the Indian context.
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Arayssi, Mahmoud, Mustafa Dah, and Mohammad Jizi. "Women on boards, sustainability reporting and firm performance." Sustainability Accounting, Management and Policy Journal 7, no. 3 (September 5, 2016): 376–401. http://dx.doi.org/10.1108/sampj-07-2015-0055.
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Purpose As pressures mount for women directors on corporate boards (WDOCBs) from different stakeholders, companies become more interested in finding out how WDOCBs impact sustainability disclosure. The purpose of this paper is to investigate the effect of gender-diverse boards on the association between sustainability reporting and shareholders’ welfare. Design/methodology/approach This paper examines the implications of women on board for firm-related factors, particularly environmental, social and governance (ESG) disclosure and firm performance. The firms studied are all listed in the Financial Times Stock Exchange 350 index between 2007 and 2012. Bloomberg social disclosure score is used and panel data through a regression model are applied. Findings The results reveal that the presence of WDOCBs favorably influences on firm’s risk and performance through promoting a firm’s investment in effectual social engagements and reporting on them. The desirable effect of WDOCB on the ESG-performance relationship leads to increased risk-adjusted and buy-and-hold abnormal returns and reduced firm risks, measured by both volatility of returns and systematic risk. Originality/value The research contributes to the literature on the relationship between women participation on corporate boards and firms’ good citizenship and enhanced shareholders’ welfare. The empirical findings contribute to providing statistical and economical validity to the UK Corporate Governance Code 2014 recommendation on the importance of board gender diversity for effective board functioning.
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Abdi, Yaghoub, Xiaoni Li, and Xavier Càmara-Turull. "Impact of Sustainability on Firm Value and Financial Performance in the Air Transport Industry." Sustainability 12, no. 23 (November 28, 2020): 9957. http://dx.doi.org/10.3390/su12239957.
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In this study, we examine the extent to which the implementation of environmental, social, and governance (ESG) disclosures influence the firm value and financial performance of airlines. The panel data analysis is applied to the set of collected data from the Thomson Reuters Eikon database for the sample of 27 airlines worldwide from 2013 to 2019. Findings of this study support the positive relationship between the environmental pillar score (Env) and governance pillar score (Gov), with market-to-book ratio and Tobin’s Q as proxies for firm value and financial performance, respectively. This finding implies that an increase in both pillars leads to higher market value and financial efficiency for investigated airlines. Therefore, an airline’s effort to improve Env and Gov dimensions will lead to higher market value and return on invested funds. In contrast, the social pillar disclosure in both models is found to have a significant negative association with the dependent variables, showing that airlines’ social activities result in lower value as well as level of performance.
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Buallay, Amina. "Between cost and value." Journal of Applied Accounting Research 20, no. 4 (December 9, 2019): 481–96. http://dx.doi.org/10.1108/jaar-12-2017-0137.
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Purpose There are wide debates about the costs and benefits of sustainability reporting. The purpose of this paper is to investigate the relationship between sustainability reporting and a firm’s financial, operational and market performance in order to determine when sustainability reporting benefits a firm and when it adds cost. Design/methodology/approach This study examined 342 financial institutions within the 20 countries that top the list of achievers of sustainable development goals for the 10 years 2007 through 2016, for a total of 3,420 observations. The independent variable is the environmental, social and governance (ESG) score; the dependent variables are performance indicators (return on assets, return on equity and Tobin’s Q). Two types of control variables are used in this study: firm level and country level. Findings The findings deduced from the empirical results demonstrate that, on the one hand, ESG positively affects market performance, which supports value creation theory. On the other hand, ESG negatively affects financial and operational performance, which supports cost-of-capital reduction theory. Research limitations/implications This study aims to find how sustainable disclosure can and does play a role in contributing towards performance of financial institutions to eventually achieve country’s sustainable development goals. Practical implications The study provides insights into the effect of sustainability reporting on different perspectives of business performance, which might be utilised by financial institutions to re-arrange their disclosure policy to be aligned with their strategy. Originality/value This study sheds light on the rare prior studies that relate sustainability reporting to indicators of business performance (operational, financial and market).
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Hamrouni, Amal, Ali Uyar, and Rim Boussaada. "Are corporate social responsibility disclosures relevant for lenders? Empirical evidence from France." Management Decision 58, no. 2 (November 27, 2019): 267–79. http://dx.doi.org/10.1108/md-06-2019-0757.
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Purpose The purpose of this paper is to test whether or not CSR disclosure (i.e. aggregate as well as its three sub-indicators) reduces the cost of debt for French corporations listed in the SBF 120 index between 2010 and 2015. Design/methodology/approach CSR disclosure ratings of firms were collected from the Bloomberg database under three dimensions such as environmental, social and governance (ESG). Then, a pooled regression analysis was run. Findings The results indicate that overall CSR disclosure score as a combination of ESG disclosure scores has a negative effect on the cost of debt (i.e. lowers the cost of debt). While environmental disclosure is negatively associated with the cost of debt, social disclosure is unexpectedly positively associated, and governance disclosure has an insignificant association with the cost of debt. Research limitations/implications The study has two main limitations. First, the analysis does not consider contractual constraints and obligations that might exist in debt contracts (Jung et al., 2018). Second, the analyses cover a specific time period (i.e. between 2010 and 2015) for a specific country (i.e. France) excluding utilities and the financial sector. Practical implications Overall, it is inferred from the results that financial markets for lenders take into account CSR disclosure when assessing the creditworthiness of borrowers. Specifically, environmental disclosure is the only subdimension of CSR that is influential on creditors’ decisions to offer favorable interest rates. In line with this outcome, companies can assess their processes and be more aligned with eco-friendly practices, and investors are particularly advised to invest in those types of firms. Originality/value This study extends scant literature on the association between CSR and the cost of debt by exploring how creditors treat CSR dimensions dissimilarly in granting loans to firms. The findings of this study have particular importance as financial debt is one of the most predominant forms of external financing.
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Coluccia, Daniela, Stefano Fontana, and Silvia Solimene. "Does Institutional Context Affect CSR Disclosure? A Study on Eurostoxx 50." Sustainability 10, no. 8 (August 9, 2018): 2823. http://dx.doi.org/10.3390/su10082823.
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We propose to investigate the relationship between corporate social responsibility disclosure and institutional/environmental factors among a sample of European listed companies. We find that, by using several traditional explicative variables, institutional factors affect the level of CSR disclosure, in a context where the EU Commission has been paying growing attention to social and environmental accountability of listed companies (see the EU Dir. 95/2014). Our findings are further supported by multivariate regression, where ESG score (measure of CSR disclosure) is regressed on nine variables which represent the expression of institutional factors. By looking at the institutional determinants of CSR disclosure, we are seeking to pose a challenge for future research agenda, in order to understand whether CSR does actually reflect an effective commitment of firms to accounting practices and rules, as a form of social behavior, or whether it is just a tool to manage stakeholders’ perception and to comply with regulation.
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Guo, Yujuan, Di Fan, and Xiao Zhang. "Social media–based customer service and firm reputation." International Journal of Operations & Production Management 40, no. 5 (May 4, 2020): 575–601. http://dx.doi.org/10.1108/ijopm-04-2019-0315.
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PurposeThis study investigates the effects of using social media for customer service on firms' reputation building. In addition, this study explores the role of absorptive capacity, ISO (International Organization for Standardization) 9,000 implementation and periodic training for management and employees in the relationship between social media–based customer service and firm reputation.Design/methodology/approachThis study sampled 115 US-listed firms and collected secondary data from five databases as follows: Factiva, Fortune's World's Most Admired Companies (WMAC), Standard & Poor's COMPUSTAT, American Customer Satisfaction Index (ACSI) and Thomson Reuters’ Environmental, Social and Governance (ESG). This study developed a panel dataset of these 115 firms from 2007 to 2016 and conducted dynamic panel data analyses to examine the hypotheses.FindingsThis study finds that a higher number of social media channels used for customer service is associated with a higher reputation score for a firm. In addition, the positive relationship is reinforced when a firm has a high absorptive capacity level, an ISO 9000 quality management system and offers periodic training for management and employees.Originality/valueTo the best of our knowledge, this is the first study to investigate the relationship between social media–based customer service and firm reputation. This study also explores the boundary factors in terms of firm absorptive capacity, ISO 9000 quality management systems and training for management and employees.
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Mohmed, Abobaker, Antoinette Flynn, and Colette Grey. "The link between CSR and earnings quality: evidence from Egypt." Journal of Accounting in Emerging Economies 10, no. 1 (November 14, 2019): 1–20. http://dx.doi.org/10.1108/jaee-10-2018-0109.
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Purpose The purpose of this paper is to investigate the relationship between corporate social responsibility (CSR) and earnings quality, as proxied by accrual earnings management, in Egyptian firms. This research is conducted in a bidirectional fashion using simultaneous equations and considers two theoretical perspectives. Design/methodology/approach The study employs CSR annual scores from the Egyptian environmental, social and governance index (S&P/ESG index) for the 100 highest scoring firms from 2007 to 2015. It utilizes three earnings quality measures, in addition to considering reverse causality and endogeneity. Findings The results indicate that CSR has a positive association with earnings quality only in the top CSR scoring firms (top 30 ranked firms according to the index). Engaging in CSR in such firms enhances the quality of their earnings. This suggests that firms with relatively lower CSR scores (bottom 70 ranked firms according to the index) may use CSR to “greenwash” weaker earnings. Research limitations/implications The findings suggest that researchers, analysts and policy makers should consider earnings quality when estimating the real value of a firm’s CSR score. In particular, the Egyptian S&P/ESG index committee could further develop the index by incorporating earnings quality measures. Originality/value The study contributes to the literature by exploring in-depth the causal relationship between CSR practices and accrual earnings management in an emerging market. The results provide a nuanced story of CSR practices, with accruals earnings management (earnings quality) acting as a mediator of CSR’s inherent value.
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Kasem, Edward, Oldřich Trenz, Jiří Hřebíček, and Oldřich Faldík. "Key Sustainability Performance Indicator Analysis for Czech Breweries." Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 63, no. 6 (2015): 1937–44. http://dx.doi.org/10.11118/actaun201563061937.
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Sustainability performance can be said to be an ability of an organization to remain productive over time and hold on to its potential for maintaining long-term profitability. Since the brewery sector is one of the most important and leading markets in the foodstuff industry of the Czech Republic, this study depicts the Czech breweries’ formal entry into sustainability reporting and performance. The purpose of this paper is to provide an efficiency level evaluation which would represent the level of corporate performance of Czech breweries. For this reason, Data Envelopment Analysis (DEA) is introduced. In order to apply it, we utilize a set of key performance indicators (KPIs) based on two international standard frameworks: the Global Reporting Initiative (GRI) and its GRI 4 guidelines, and the guideline KPIs for ESG 3.0, which was published by the DVFA Society. Four sustainability dimensions (economic, environmental, social and governance) are covered, making it thus possible to adequately evaluate sustainability performance in Czech breweries. The main output is not only the efficiency score of the company but also the input weights. These weights are used to determine the contribution of particular criteria to the breweries’ achieved score. According to the achieved efficiency results for Czech breweries, the percentage of women supervising the company does not affect the sustainability performance.
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Morales Castro, Arturo, Sandra Avendaño Cruz, and José Miguel Mata Hernández. "Pronóstico de quiebra y valuación de acciones en empresas sustentables de México en la era COVID19." ECONÓMICAS CUC 42, no. 2 (March 1, 2021): 161–72. http://dx.doi.org/10.17981/econcuc.42.2.2021.econ.1.
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En los años recientes las empresas sustentables han sido un gran auge en cuanto a inversión y medidas sostenibles por las mismas, es por ello por lo que varios inversionistas han buscado conformar sus portafolios de inversión con empresas sustentables. Por sustentable se entiende como el proceso que busca lograr una prosperidad económica y el equilibrio entre el medio ambiente y el uso de los recursos naturales. El S&P/BMV Total México ESG Índex de la Bolsa Mexicana de Valores agrupa a varias empresas que poseen las mejores prácticas en desempeño ambiental, social y de gobierno corporativo, esto con el objetivo de formar una economía sólida, que sea adecuada al contexto actual y las necesidades del futuro. El estudio de la presente investigación se enfoca al análisis de empresas que pertenecen al S&P/BMV Total México ESG Índex de la Bolsa Mexicana de Valores, con el objetivo de aplicar el cálculo de Q de Tobin que fue propuesta por Tobin (1969), la cual consiste en determinar si la acción de la empresas están subvaluadas, sobrevaluadas o son valoradas correctamente y por otro lado el cálculo de Z score de Altman que fue propuesta por Altman (1968), el cual consiste en pronosticar la quiebra en las empresas, estos cálculos se utilizan para observar si las empresas que pertenecen a este índice tienen: salud financiera, si el valor de la acción de estas entidades está sobrevalorado o infravalorado y las probabilidades de quebrar que tengan estas mismas firmas. Se concluye que a raíz del COVID-19 los Resultados Financieros del primer trimestre de 2020 se vieron afectados y por tanto las empresas están en riesgo de quiebra y otras por su posicionamiento y expansión no se vieron afectadas de acuerdo con los parámetros de los modelos mencionados.
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Sariannidis, Nikolaos, George Konteos, and Grigoris Giannarakis. "The effects of greenhouse gas emissions and governance factors on corporate socially responsibility disclosure." Corporate Ownership and Control 12, no. 2 (2015): 92–106. http://dx.doi.org/10.22495/cocv12i2p8.
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This paper investigates the impact of a plausible set of determinants, namely, greenhouse gas (GHG) emissions, Dow Jones Sustainability Index (DJSI), anti-bribery policy, the industry’s profile and the company’s size on the extent of CSR disclosure in the United States (US). The Environmental, Social and Governance (ESG) disclosure score is used as a proxy for the extent of CSR disclosure calculated by Bloomberg, incorporating different - in terms of importance - disclosure items. The relationship between the extent of CSR disclosure and its determinants was examined using multiple linear regression analysis incorporating 133 companies listed in S&P Composite 1500 Index for the year 2011. The results illustrate that the company’s size, GHG emissions, DJSI and anti-bribery policy are significantly positively associated with the extent of CSR disclosure. In addition, there are significant differences among the industries’ profile concerning the extent of CSR disclosure. The results cannot be generalized because the sample is based on US listed companies for the year 2011. This study presents initial empirical data investigating different types of disclosures and determinants which extend the scope of previous studies
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Prorokowski, Lukasz. "Environmental Risk Index for financial services firms." Qualitative Research in Financial Markets 8, no. 1 (February 1, 2016): 16–44. http://dx.doi.org/10.1108/qrfm-04-2015-0018.
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Purpose – This paper aims to provide an index benchmarking financial services firms against their environmental performance. The paper also introduces a new definition of the environmental risk that fits the current business and regulatory landscape of financial services firms. The Environmental Risk Index (ERI) helps financial services firms review their corporate social responsibility (CSR)/environmental and social governance (ESG) frameworks and address any shortcomings. With this in mind, every financial institution should understand that the Index is not primarily about the ranking, but about the highlighted areas that require significant investment to improve the overall management and understanding of environmental risk. This paper points to the link between being “green” and financial performance. As it transpires, addressing environmental risk serves not only the planet but also banks themselves by bringing in new business, reducing costs and avoiding reputational damage. Design/methodology/approach – The ERI relies on 44 variables grouped into ten thematic vectors that relate to different aspects of environmental risk management. Data for calculating the ERI are obtained by reviewing CSR and Sustainability Reports produced annually by financial services firms. Reports encompassing 2013 have been analysed to ensure objectivity and comparability of the results. A universal approach to all organisations has been taken in the numerical calculation of this index. The variables have been constructed such that they fit a wide range of institutions, from G-SIB banks and international asset managers through to smaller, domestic firms. As it transpires, the efforts to become “greener” are similar for financial institutions regardless of their market capitalisation or international reach. Findings – As far as the general ranking for the ERI is concerned, the range between the first and the last bank equals 524 points. With the maximum of 1,000 points that could be achieved in the ranking, the average score is 633 points and over 50 per cent of the banks have scored above the average. As it transpires, European banks outperform institutions from other regions with the average ERI score of 700. Banks repressing the Middle East region lag behind in their environmental performance. Interestingly, ERI scores and revenue figures are almost uncorrelated for large banks. This proves that any bank, despite its global presence and revenue, can develop similar environmental risk initiatives. The empirical analysis of the index results and revenue figures suggest that the revenue is related to the environmental performance. In other words, it is profitable to become “greener”. For every point in the ERI score gained, the revenue should increase slightly by a factor of 0.02. Practical/implications – This paper cuts through the environmental jargon, extensive literature review on environmental issues, socio-political issues and scientific study to deliver a clear picture of what needs to be done in the area of the environmental risk for financial services firms to reduce costs, increase business, improve reputation, address certain regulatory initiatives, strengthen the environmental and social governance and become more environmentally responsible. Originality/value – This paper, in a pioneering attempt, has presented the ERI encompassing financial services firms. At this point, the paper serves as a benchmarking tool for financial institutions willing to compare their “green” status. Looking at environmental risk has become an important part of the journey towards carefully managing business processes to generate a positive image. The importance of environmental risk is further underscored by investors, shareholders and regulators taking an increasing interest in banks’ activities. With this in mind, financial services firms need to scrutinise their operations with a particular focus on the quality of management in terms of people, environment and processes.
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Albitar, Khaldoon, Khaled Hussainey, Nasir Kolade, and Ali Meftah Gerged. "ESG disclosure and firm performance before and after IR." International Journal of Accounting & Information Management 28, no. 3 (March 27, 2020): 429–44. http://dx.doi.org/10.1108/ijaim-09-2019-0108.
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Purpose This paper aims to investigate the effect of environmental, social and governance disclosure (ESGD) on firm performance (FP) before and after the introduction of integrated reporting (IR) further to exploring a potential moderation effect of corporate governance mechanisms on this relationship. Design/methodology/approach Ordinary least squares and firm-fixed effects models were estimated based on data related to FTSE 350 between 2009 and 2018. The data has been mainly collected from Bloomberg and Capital IQ. This analysis was supplemented with applying a two-stage least squares (2 SLS) model to address any concerns regarding the expected occurrence of endogeneity problems. Findings The results show a positive and significant relationship between ESGD score and FP before and after 2013, among a sample of FTSE 350. Furthermore, the study is suggestive of a moderation effect of corporate governance mechanisms (i.e. ownership concentration, gender diversity and board size) on the ESGD-FP nexus. Additionally, this paper finds that firms voluntarily associated with IR have a tendency to achieve better firm financial performance. Practical implications The findings of the present study have several policy and practitioner implications. For example, managers may engage in ESGD to enhance their firms’ financial performance by the voluntary involvement in IR, which believed to help investors to rationalise their investment decisions. Likewise, the results reiterate the crucial need to integrate more social, environmental and economic regulations to promote sustainability in the UK. The paper also offers a systematic picture for policymakers in the UK as well as future researchers. Social implications The findings of this paper indicate that IR plays a significant role in the relationship between ESGD and FP, where IR firms seemed to be achieving better FP as compared with their non-IR counterparts. This implies that stakeholders may have played a magnificent effort to encourage firms’ voluntary engagement in IR in the UK. Originality/value To the best of the authors’ knowledge, this is the first study to explore the potential moderating effect of ownership concentration, gender diversity and board size on the relationship between ESGD and FP and to examine whether firms’ voluntary involvement in IR can lead to better FP after the introduction of IR in 2013 in the UK.
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Sumunar, Kurnia, and Chaerul Djakman. "CEO OVERCONFIDENCE, ESG DISCLOSURE, AND FIRM RISK." Jurnal Akuntansi dan Keuangan Indonesia 17, no. 1 (June 30, 2020). http://dx.doi.org/10.21002/jaki.2020.01.
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Environmental, Social, and Governance (ESG) has increasingly attracted the attention of firms and stakeholders. The purpose of this study is to examine whether the mediating role of ESG disclosure has a negative effect on CEO overconfidence and firm risk, especially based on investors' perspectives. Many studies on ESG disclosure were conducted in Europe and America. Most ESG disclosures are measured using manual checklist based on annual reports or firm websites. By using panel dataset of 225 manufacturing firms in Indonesia, Malaysia, the Philippines, Singapore and Thailand from 2012-2016 obtained from Thomson Reuters’ ESG score, the research shows that CEO overconfidence has no negative direct effect on firm risk but the role of ESG disclosure as a mediating variable has a negative effect on CEO overconfidence and firm risk. CEO overconfidence has a positive effect on ESG disclosure and ESG disclosure has a negative effect on firm risk. CEO with overconfidence characteristics will make the best decisions to disclose ESG in order to increase firm value and reduce firm risk.
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"Does ESG Disclosure Create Value to Firms? The Malaysian Case." Journal of Social Sciences Research, SPI6 (December 26, 2018): 515–21. http://dx.doi.org/10.32861/jssr.spi6.515.521.
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We examine whether ESG (Environmental, Social and Governance) disclosure creates value to Malaysian firms. Based on the dataset of 37 Malaysian publicly traded firms, our results obtained from various panel regression models show that the overall ESG disclosure score and its environmental and governance pillars are positively associated with Tobin’s Q. This implies that Malaysian firms which act in accordance to social norms will be rewarded by the market. The outcomes of this research highlight the importance of non-financial data disclosure in Malaysian market.
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Yilmaz, Ilker. "Sustainability and financial performance relationship: international evidence." World Journal of Entrepreneurship, Management and Sustainable Development ahead-of-print, ahead-of-print (April 5, 2021). http://dx.doi.org/10.1108/wjemsd-10-2020-0133.
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PurposeThe purpose of the article is to examine the relationship of corporate sustainability to firm financial performance by presenting international data.Design/methodology/approachThe sample includes non-financial companies from five emerging economies known as BRICS for a five-year period of 2014–2018. The study uses the ESG (environmental, social, governance) scores from Sustainalytics database and financial data from company reports. Panel regression models are developed to figure out the relationship.FindingsThe results of the article revealed that there is a positively significant relationship between sustainability performance and financial performance. Total ESG score has produced significant results while the individual scores of environmental, social, and governance have produced insignificant results; implying that the components of total ESG score have a joint effect on the financial performance.Practical implicationsThe results of the article have important practical implications for companies. Engagement in sustainable business practices will help improve the financial performance. In addition, the companies should be active in all components of sustainability.Originality/valueThe article contributed empirical evidence for sustainability-financial performance relationship by using the international evidence from five emerging economies.
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Chouaibi, Salim, Jamel Chouaibi, and Matteo Rossi. "ESG and corporate financial performance: the mediating role of green innovation: UK common law versus Germany civil law." EuroMed Journal of Business ahead-of-print, ahead-of-print (January 13, 2021). http://dx.doi.org/10.1108/emjb-09-2020-0101.
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PurposeThe purpose of this paper is to investigate the direct and indirect links between environmental, social and governance (ESG) practices and financial performance using the mediate role of green innovation.Design/methodology/approachTo test the current study hypotheses, the authors applied linear regressions with a panel data using the Thomson Reuters ASSET4 and Bloomberg database from a sample of 115 UK and 90 Germany companies selected from the ESG index over the period 2005–2019.FindingsThe results show that the strengths ESG increase the firm value and the weaknesses decrease it. In addition, the authors find that green innovation fully mediates the relationship between ESG practices and financial performance in UK and Germany.Practical implicationsThe findings provide interesting implications to academics practitioners and regulators who are interested in discovering ESG score, financial performance and green innovation. The results also provide insights to regulators and the board of directors on future growth opportunities for the company and the country.Originality/valueThis study is unique in examining the mediation effect of green innovation on the relationship between ESG practices and financial performance.
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Sládková, Jitka, Daniela Kolomazníková, Sylvie Formánková, Oldřich Trenz, Jan Kolomazník, and Oldřich Faldík. "Sustainable and responsible investment funds in Europe." Measuring Business Excellence ahead-of-print, ahead-of-print (May 18, 2021). http://dx.doi.org/10.1108/mbe-07-2019-0072.
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Purpose The sustainable and responsible investing (SRI) is the part of sustainable investment which focusses on mutual funds. The purpose of this paper is to map and evaluate all the active European SRI funds, their performances and correlation with the national identity. Design/methodology/approach The sample of the research was analysed with descriptive statistics, mainly the frequency, the mean and the correlation analysis. A well-known volatility is represented by the synthetic risk and reward indicator (SRRI). Other two ratings are the environmental, social and governance (ESG) funds score distribution and the ESG funds letter rating distribution. Findings SRI investment may seem to be performing better than in the funds with a different focus. The segment of SRI funds will grow for the next decade. Research limitations/implications There is a lack of definitions and clear metrics for sustainable investing. For better performance, it would be also appropriate to examine each country separately. Practical implications This paper is part of the project targeting to design a model and methodology of SI evaluation taking into account ESG factors and risks, including profitability in a selected sector. This model can be used by investors for better decision-making. Social implications The paper focusses on the funds selecting investments that fulfil ESG criteria, which are part of the social responsibility and sustainability. Originality/value An analysis of the current approaches to evaluating investments shows that the key barrier in the transitions to sustainable investment is not taking into account the ESG factors. The research in this paper includes the ESG factors in the evaluation.
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Buallay, Amina. "Sustainability reporting and agriculture industries’ performance: worldwide evidence." Journal of Agribusiness in Developing and Emerging Economies ahead-of-print, ahead-of-print (June 25, 2021). http://dx.doi.org/10.1108/jadee-10-2020-0247.
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PurposeThis study investigates the impact of sustainability reporting on agriculture industries’ performance (operational, financial and market).Design/methodology/approachUsing data culled from 1426 observations from 31 different countries for ten years (2008–2017), an independent variable derived from the Environmental, Social and Governance (ESG) score is regressed against dependent manufacture performance indicator variables [return on assets (ROA), return on equity (ROE) and Tobin's Q (TQ)]. Two types of control variables complete the regression analysis in this study: firm-specific and macroeconomic.FindingsThe findings elicited from the empirical results demonstrate that there is no significant relationship between ESG and operational performance (ROA), financial performance (ROE) and market performance (TQ). Surprisingly, when each component of ESG is regressed separately against the performance, the results reveal that governance disclosure has a positive impact on market performance.Research limitations/implicationsThis study captures only quantity rather than the quality of ESG disclosure. Therefore, the results of this study may not necessarily give the “true” motivation for firms to disclose sustainability activities.Originality/valueThis study highlights the agriculture industry management lacunae manifesting in terms of the weak nexus between each component of ESG and agriculture industries’ performance.
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Buallay, Amina, Jasim Al-Ajmi, and Elisabetta Barone. "Sustainability engagement’s impact on tourism sector performance: linear and nonlinear models." Journal of Organizational Change Management ahead-of-print, ahead-of-print (March 1, 2021). http://dx.doi.org/10.1108/jocm-10-2020-0308.
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PurposeThis study aims to investigate the relationship between the level of sustainability reporting and tourism sector’s performance (operational, financial and market).Design/methodology/approachUsing data culled from 1,375 observations from 37 different countries for ten years (2008–2017), an independent variable derived from the environmental, social and governance (ESG score) is regressed against dependent performance indicator variables (return on assets (ROA), return on equity (ROE) and Tobin's Q (TQ)). Two types of control variables complete the regression analysis in this study: firm-specific and macroeconomic.FindingsThe findings elicited from the empirical results of the linear models demonstrate that there is a significant relationship between ESG and operational performance (ROA) and market performance (TQ). However, there is no significant relationship between ESG and financial performance (ROE). Furthermore, the results of the nonlinear models suggest that the relationship between sustainability performance and firm's profitability and valuation is nonlinear (inverted U-shape).Originality/valueThe models in this study presents a valuable analytical framework for exploring sustainability reporting as a driver of performance in the tourism sector's economies. In addition, this study highlights the tourism sector's management lacunae manifesting in terms of the weak nexus between each component of ESG and tourism sector's performance.
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P, Fahad, and Nidheesh KB. "Determinants of CSR disclosure: an evidence from India." Journal of Indian Business Research ahead-of-print, ahead-of-print (May 14, 2020). http://dx.doi.org/10.1108/jibr-06-2018-0171.
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Purpose This paper aims to undertake an empirical investigation on firm characteristics determining corporate social responsibility (CSR) disclosure and its subcategories such as environmental, social and governance disclosures. Design/methodology/approach The sample consisted of listed companies in BSE 500 index for a period of 10 years from 2007 to 2016. Panel data regression method is used for the analysis. Seven variables are analyzed, namely, firm age, financial leverage, firm size, foreign ownership, promoter ownership, export performance, innovation and firm popularity. Findings The result shows that firm age and financial leverage are positively influencing CSR, environmental and social disclosure score but both are negatively influencing governance score. Firm size is positively associated with all four disclosure scores. Among ownership variables, foreign ownership shows a positive influence and promoters ownership shows a negative influence towards CSR, environment and social disclosures. No association is found between both ownership variables and governance disclosure score. Further analysis also finds that there is a difference in this relationship during crisis period. Research limitations/implications The study focuses only on listed companies in Indian capital market. In terms of implication, theoretical bases discussed in the literature review and hypotheses development are mostly validated. Practical implications The findings are important for the firm, stakeholders and policymakers. A firm may think about appointing experts in CSR to spend the amount wisely and improve CSR disclosure to compete in the international market; stakeholders have to pressure the firm to provide more CSR disclosure and for policymakers this study study provides useful inputs to design legal framework on CSR. Originality/value The measurement of CSR disclosure using environmental, social and governance (ESG) score is novel in Indian context, even though the methodology is often used in literature.
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Jizi, Mohammad, Rabih Nehme, and Cynthia Melhem. "Board gender diversity and firms' social engagement in the Gulf Cooperation Council (GCC) countries." Equality, Diversity and Inclusion: An International Journal ahead-of-print, ahead-of-print (August 31, 2021). http://dx.doi.org/10.1108/edi-02-2021-0041.
Full textAbstract:
PurposeThe Gulf Cooperation Council (GCC) countries form a unique socioeconomic environment that makes the conclusions of the prior literature not likely to be applicable. GCC countries have huge oil reserves, yet they are aiming at reducing oil dependency through enhancing transparency, increasing foreign direct investments and reforming their governance structure. Their firms are mainly family owned and have low female representation in leadership positions. The study seeks to fill a literature gap by providing a business case supporting the call for gender diverse boards for better governance.Design/methodology/approachThe study examines a sample of GCC-listed firms for the years 2009–2018. Three measures are used to proxy for firm social engagement, namely, CSR strategy score, environmental, social and governance (ESG) disclosure score and social pillar score. To ensure whether the presence of women on board or the number of women on board is influential on social engagements, the authors use the existence of women on board and the percentage of women on board variables. Data are collected using Thomson Reuters, and generalized least squares (GLS) panel data regression is used to estimate relationships.FindingsThe authors find that female representation on GCC corporate boards is increasing, yet in a slow path. The reported results support the role of women on boards in prompting firms' social agenda and enhancing the level of sustainability reporting. The results also show that female board representation supports the implementation of climate change policy, business ethics policy and health and safety policy.Originality/valueThe paper evidence the add value of women participation on GCC corporate boards in enhancing boards' functionality and governance. The empirical findings encourage firms and policymakers in the GCC countries to increase the share of females on corporate boards to improve firms' citizenship and facilitate attracting foreign investors.