Exploring environmental, social, and governance disclosure effects on the S&P 500 financial performance

Abstract

Much of the literature measuring the relationship between environmental, social, and governance (ESG) scores and firm performance treats the score as a measure of sustainability performance. In this study, we treat a firm's ESG score as a demonstration of strategic choice in the level of transparency that results in increased firm performance as measured by Tobin's Q and return on assets. Performance differences are a result of choice moderated by the size of the firm as measured by employees and sales. We analyze 467 firms in the S&P 500 from 2009 to 2015. Applying legitimacy and stakeholder theory, we find that there is significant difference between groups with respect to disclosure and performance. The results of quartile analysis by sales, capitalization, and Tobin's Q are relevant to understand the influence that the ESG score has on financial performance. ESG influences on Tobin's Q are greatest for large firms as measured by sales, as opposed to the ESG affects on Tobin's Q and return on asset for smallest firms as measured by market capitalization.

Do the ecoinnovation and ecodesign strategies generate value added in munificent environments?

“…In addition, to avoid biased results, we included several control variables, selected according to the previous literature (i.e., Amini, Bienstock, & Narcum, ; Amorelli & García‐Sánchez, ; Chen et al, ; Ghisetti, Marzucchi, & Montresor, ; Lee et al, ; Minutolo, Kristjanpoller, & Stakeley, ; Terrón Ibáñez, Gómez‐Miranda, Rodríguez, & Rodríguez Ariza, ; Tomas Siueia & Wang, ; Tsai & Liao, ; Tsai & Wang, ): “Size” is a numerical variable that represents the size of the company through the logarithm of total assets; “Leverage” is a numerical variable that represents financial leverage through the proportion of foreign funds and equity; “WC” is a numerical variable that represents the fund maneuver or liquidity of the company; “Dividend” is a numerical variable that represents the dividends accrued per share; “ForeignSales” is a numerical variable that represents the percentage of sales in markets other than domestic; “CapitalExp” is a numerical variable that represents the investment in physical capital relativized by sales; “R&D” is a numerical variable that represents the investment in R + D + i relativized by sales; “FirmAge” is a numerical variable that represents the age of the company; “CorpGovScore” is a numerical variable that represents the good corporate governance of the company through a score; and “SocialScore” is a numerical variable that represents the sustainability of social practices through a score. On the other hand, when we return the variable “Tobin Q ,” we control for economic profitability, “ROA.” Moreover, we control for “Country,” “Industry,” “Year,” “NCSRPI,” and the level of orientation towards the stakeholders of the company's country of origin (Amor‐Esteban, Galindo‐Vicente, & García‐Sánchez, ; Amor‐Esteban, Galindo‐Vicente, & García‐Sánchez, ; Amor‐Esteban, Galindo‐Villardón, & García‐Sánchez, ; Amor‐Esteban, García‐Sánchez, & Galindo‐Vicente, ; Amor‐Esteban, García‐Sánchez, & Galindo‐Vicente, ; García‐Sánchez, Cuadrado‐Ballesteros, & Frías‐Aceituno, ).…”

The impact of ISO 14001 on firm environmental and economic performance: The moderating role of size and environmental awareness

“…Economic performance is measured by ROAs, which is defined as the ratio of net profit to total assets. ROA reflects the efficiency of a firm's use of its assets to generate profits (Minutolo, Kristjanpoller, & Stakeley, 2019). Environmental performance is proxied by the RCO 2 , defined as tons of carbon dioxide emitted by the firm divided by total revenue.…”

Sustainable development: The stock market's view of environmental policy

“…More specifically, Fanasch (2019) observed that individual reputation and ecocertification have a positive and significant impact on corporate performance. Additionally, the proponents of the instrumental stakeholder theory (Davis, 1973;Donaldson & Preston, 1995;Jones, 1995;Orlitzky et al, 2003) the Tobin Q (e.g., Konar & Cohen, 2001;Li, Liao, & Albitar, 2020;Minutolo, Kristjanpoller, & Stakeley, 2019;Wang et al, 2014) to the natural resource-based view of the firm (Hart, 1995), greener firms would be better able to differentiate their products than their less green peers. According to Manrique and Martí-Ballester, whereas civil society exerts strong pressures for environmental issues in developed countries (Cui, Liang, & Lu, 2015), the situation in developing countries is characterized by a less intense environmental awareness (Dagher & Itani, 2014…”