Does environmental, social and governance (ESG) affect market performance? The moderating role of competitive advantage

Abstract

Purpose This research aims to determine the influence of environmental, social and governance (ESG) factors on market performance. The study shows the perspective of ESG on market performance. The study attempted to test the relationship between ESG and Tobin’s Q and the effect of control variables. Design/methodology/approach The study used panel data from a sample covering 720 firms and ran a fixed-effects model regression during the 2007–2019 period for eight European countries’ listed companies. Findings The findings reveal that ESG positively impacts Tobin’s Q. According to the findings, high company ESG performance boosts market performance via the moderator effect of competitive advantage. The results indicate that all control variables are significant. The firm’s leverage has a negative relationship with ESG. The size of the firm impacts ESG positively. Also, the results prove that the firm’s size and industry positively affect Tobin’s Q. Research limitations/implications The findings of this study suggest that managers, practitioners and authorities interested in learning about ESG scores (ESGSs), market performance and competitive advantage might draw intriguing conclusions from the data. Managers can identify the appropriate levels of competitive advantage that improve market performance. Practitioners must determine whether fit, size, growth, leverage and industry could enhance market performance. The findings also give authorities and the board of directors information on future growth opportunities for the company and the country. Originality/value The research presents a vision of how ESG factors affect market performance. This study aims to identify the positive link between ESGSs and European market performance.

The Moderating Role of Technological Innovation on Environment, Social, and Governance (ESG) Performance and Firm Value: Evidence from Developing and Least-Developed Countries

“…On the contrary, Ref. [25]'s results show that in most instances, a strong ESG performance does not guarantee a financial return for the company in terms of both value and profitability.…”

Contribution of Corporate Social Responsibility as a Mediator in Firm Value

“…Shareholders can use ESG as a guide in determining their investment in the company. Research by Dkhili (2024) Research conducted by Worokinasih & Zaini (2020) shows that GCG significantly influences CSR. In line with this, research by Fatma & Chouaibi ( 2023) also shows that GCG has a positive effect on CSR.…”

Aspek Manakah Yang Memberikan Imun Lebih Baik Bagi Kinerja Keuangan & Penilaian Pasar Perusahaan?

“…Beberapa penelitian mengaitkannya dengan kinerja keuangan dan menemukan hasil yang positif (Ademi & Klungseth, 2022;Chen et al, 2023;Dkhili, 2023;Durlista & Wahyudi, 2023;Kalia & Aggarwal, 2023). Tidak hanya itu, riset lain juga melihat dari sudut pandang yang berbeda untuk melihat bagaimana ESG mempengaruhi kinerja perusahaan, diantaranya dari aspek budaya (Shin et al, 2023), peran CEO (Velte, 2019), competitive advantage (Dkhili, 2023), inovasi perusahaan (Pinheiro et al, 2023) bahkan pengaruh ESG terhadap miopia manajerial (Zhang et al, 2023), Selain itu, penerapan ESG dapat membantu perusahaan terhindar dari kesulitan keuangan dan kebangkrutan (Habib, 2023). Serta berdampak bagi rating kredit perusahaan (Bhattacharya & Sharma, 2019).…”

“…Hasil studi ini tidak sejalan dengan penelitian sebelumnya (Aboud & Diab, 2018;Ademi & Klungseth, 2022;Beloskar & Rao, 2023;Dkhili, 2023;Durlista & Wahyudi, 2023;Safriani & Utomo, 2020;Velte, 2019) yang menyatakan bahwa kinerja ESG yang bagus, baik itu ESG keseluruhan maupun kinerja dari tiga parameter yang di ukur terpisah mampu meningkatkan reputasi perusahaan dan membawa manfaat ekonomi bagi pertumbuhan kinerja perusahaan. Sedangkan menurut beberapa teori yang mendukung ESG (stakeholder theory, legitmacy theory, dan value creation theory).…”

“…Sedangkan aspek lingkungan tidak berpengaruh terhadap penilaian pasar perusahaan. Ademi & Klungseth (2022) dan penelitian oleh Dkhili (2023), yang menjumpai bahwa perusahaan dengan kinerja ESG yang baik akan memberikan perusahaan keunggulan kompetitif dan menjadi insentif untuk mencapai harapan serta pengakuan pemegang saham yang dapat meningkatkan nilai pasar perusahaan.…”