Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets

Naeem, Nasruzzaman; Çankaya, Serkan; Bildik, Recep

doi:10.1016/j.bir.2022.11.014

Cited by 53 publications

(39 citation statements)

References 25 publications

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“…As part of this research work, we used the market-to-book value (MTBV) as a proxy for measuring financial performance. Like previous works (Radhouane et al , 2018; Naeem et al , 2022; Verma et al , 2022), we opted for measuring financial performance by the market-to-book value (MTBV). This variable makes it possible to capture the reputational impact of environmental performance (Chouaibi and Chouaibi, 2021; Verma et al , 2022; Chen and Xie, 2022) and reflects the reaction of investors to the bank’s various environmental decisions (Lee et al , 2015).…”

Section: Methodsmentioning

confidence: 99%

“…The overall ESG score involves an equal weighting of all relevant data points, a z -score and comparison with data points from all other banks to obtain a relative measure of performance expressed as a percentage ranging from 0% to 100% (a z -score is a relative measure indicating the numerical value of the standard deviation of a given observation relative to the mean value of all other observations). This measure of CSR has been used in a series of academic studies in various research fields (Velte, 2020; Naeem et al , 2022). The strength of the link between financial performance and ESG performance depends on how they are measured.…”

Section: Methodsmentioning

confidence: 99%

“…We verified whether the mediating role of ESG practices remains intact if we replace the financial performance measured by the MTBV with the stock market valuation using the Tobin’s Q ratio. This variable has already been used in previous literature to measure financial performance in the banking sector (Fatemi et al , 2018; El Khoury et al , 2021; Naeem et al , 2022; Chouaibi et al , 2022). Empirically, we re-run Models (1), (2) and (4) using the TOBINQ as a proxy for the stock market valuation of banks.…”

Section: Robustness Analysismentioning

confidence: 99%

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Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Ben Ali,

Chouaibi

2023

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Purpose This study aims to investigate whether integrating environmental, social and governance (ESG) practices mediates the relationship between executive incentive compensation and the financial performance of Islamic and conventional banks in the Middle East and North Africa (MENA) region. Design/methodology/approach This study used multiple regression models to analyze the effectiveness of ESG practices as a mediating variable in explaining the relationship between executive incentive compensation and banks’ financial performance between 2015 and 2021. The sample consisted of 57 Islamic and conventional banks operating in the MENA region, and the data were collected from the Thomson Reuters database (Data Stream). Findings This research paper showed the positive and significant mediating effect of the ESG practice on Banks’ financial performance. Thus, banks’ financial and stock market profitability is influenced by ESG information disclosure. This finding shows that taking ESG into account improves the relationship between executive incentive compensation and banks’ financial performance. Practical implications The results may interest academic researchers, regulators and policymakers and would support stakeholders and decision-makers who wish to discover how executive incentive compensation affects financial performance in banks. Originality/value This study contributes to previous literature by studying the mediating effect of ESG practices on the relationship between executive incentive compensation and banks’ financial performance. Indeed, the originality of this research paper is justified by the scarcity of studies and, to the best of the authors’ knowledge, constitutes one of the first attempts to examine this relationship via a mediating variable, i.e. ESG.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Robustness Analysismentioning

confidence: 99%

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Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Ben Ali,

Chouaibi

2023

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“…These results are not in line with research conducted by (Tryono & Junarsin, Eddy SE, MBA, 2018), and Tambun, 2021), which explains that companies that have better environmental performance do not influence company stock returns. However, in the research conducted by (He et al, 2023) and (Naeem et al, 2022) it is shown that environmental scores affect stock performance.…”

Section: H3: Rejectedmentioning

confidence: 99%

The Influence of Environmental, Social, and Governance Performance Disclosure on Stock Performance

Novia,

Adrianto,

Geraldina

2024

JWS

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This research aims to evaluate the effect of environmental, social, and governance (ESG) performance disclosure on the stock performance of companies listed on the Indonesia Stock Exchange (BEI) during the 2018-2022 period, using the price earning ratio (PER) as an indicator of stock performance. The research population includes companies listed on the IDX with ESG scores from the Thomson Reuters Eikon Database during the period studied. The research sample of 190 companies was selected using a purposive sampling technique. The data analysis method used is Panel Data Regression Analysis with the help of STATA 14 for Windows software. The research results show that environmental performance partially has a positive and significant influence on stock performance, while social and governance performance has no significant influence. Simultaneously, environmental, social, and governance performance variables influence the company's stock performance. This research implies that companies on the IDX can improve their stock performance by paying attention to environmental performance aspects. Even though social and governance performance does not partially show a significant influence, attention to these three aspects can improve overall stock performance. These findings provide insight to practitioners, regulators, and investors regarding the importance of ESG disclosure in the context of the Indonesian capital market.

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“…Gillan et al [ 19 ] reviewed the literature on the factors and economic consequences of ESG from the perspective of corporate finance. Naeem and Simin Chen et al focused on the relationship between ESG and financial performance, while Li et al focused on the measurement and management of business performance [ 9 , 15 , 20 ]. The results showed that environmental, social, and governance performance had a substantial impact on firm behavior and outcomes, including firm market value, manager misconduct, and firm performance [ 21 ].…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

The ESG performance influence mechanism analysis-based on empirical analysis

Ma,

Yuan,

et al. 2024

PLoS ONE

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ESG has emerged as a prominent method for evaluating enterprises, gaining increasing importance in recent years. It assesses a company’s ability to promote sustainable economic development and fulfill its social responsibilities, encompassing three non-financial dimensions: environmental, social, and corporate governance. Regulatory authorities, industry associations, and investment institutions worldwide have placed growing emphasis on a company’s ESG performance. From the perspective of career concern, this study conducted a multiple regression analysis using data from Chinese A-share companies listed in Shanghai and Shenzhen from 2011 to 2020. It used CEO shareholding and CEO political affiliation as moderating variables to examine the impact of CEO career concerns on the corporate environment, society, and corporate governance performance. Empirical testing of whether CEO career concerns promote or suppress the ESG performance in enterprises. The findings of this study reveal that CEOs with heightened career concerns tend to impede the ESG performance of their respective enterprises. Additionally, CEO shareholding and political affiliations exert a negative moderating influence on the relationship between CEO career concerns and ESG performance. This research significantly extends the investigation into factors influencing ESG performance, offering fresh perspectives that could inform improved CEO oversight, foster corporate transformation, and enhance ESG performance.

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Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets

Cited by 53 publications

References 25 publications

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

The Influence of Environmental, Social, and Governance Performance Disclosure on Stock Performance

The ESG performance influence mechanism analysis-based on empirical analysis

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