Environmental, social, and governance and company profitability: Are financial intermediaries different?

Abstract

This paper investigates the association between environmental, social, and governance (ESG) disclosure and company profitability, as measured by return on assets (ROA). We first assess a method to indexing the ESG score of a large sample of U.S. listed companies based on MSCI ESG KLD STATS data from 2000 to 2016. The statistical model is run on 17,358 observations and studies the association of ROA and the three different dimensions of ESG score. Significant differences between industrial firms and financial intermediaries emerge. We find a significant and positive association between ESG and that the environmental awareness in banks is strongly related to profitability, providing implications for policy makers and policy takers.

Corporate financial performance due to sustainable development in Vietnam

“…In the first-stage quantitative research, we were facing a lack of access to the necessary data to conduct our study in a full scale. We are able only to collect data related to the ROE (one of short-term indicators of financial performance) of Brogi and Lagasio (2019) Association between environmental, social, and governance disclosure and company profitability measured by ROA…”

“…The comprehensive analysis carried out by Waheed and Yang (2019) on 450 small and medium enterprises (SMEs) from Pakistan unveiled the significantly higher effect of external CSR disclosure than internal CSR disclosure on marketing and sales performance. Brogi and Lagasio (2019) Although many extant studies focus on the relation between CFP and CSR reporting, less attention has been given to the shifting role of financial performance in CSR reporting in a changing institutional environment. Sun, Zhao, and Cho (2019) have investigate whether, why, and how institutional transitions affect the role of financial performance in CSR reporting in terms of firms' propensity to issue standalone CSR reports, the quality of voluntary CSR reports, and the quality of mandatory CSR reports.…”

Corporate governance and environmental social governance disclosure: A meta‐analytical review

“…From a theoretical point of view, researcher may further investigate differences resulting by a cross-country and cross-industry sample construction (Brammer & Pavelin, 2008;Brogi & Lagasio, 2018). Indeed, as concerns the former, the sample of analysis is not reliable for a subgroup analysis that investigates different and similarities between countries.…”

The Interaction Effect between ESG and Green Innovation and Its Impact on Firm Value from the Perspective of Information Disclosure

“…Qiu et al (2019) also found that environment, society, and governance have different impacts on these financing costs; only the dimensions of environment and governance can ultimately reduce them [33]. When they studied the relationship between ESG's three-dimension disclosure scores and ROA, Brogi et al (2019) found that all three dimensions were positively correlated with ROA, but S was the most correlated with ROA [34]. Based on this, this study discusses the relationship between firm value and the three dimensions of environment, society, and governance and discusses whether the information disclosure of each dimension has a consistent or positive impact on firm value.…”

“…This view has been confirmed by some scholars. If an enterprise invests too much money in social responsibility activities, its consumers will think that the enterprise overuses scientific research funds, that the product quality is not guaranteed, or that the enterprise's performance will be reduced [7,35]. Similarly, Coluccia et al (2019) found that there is a substitution effect occurring between investment in R&D and ESG scores.…”