Influence of ESGC Indicators on Financial Performance of Listed Pharmaceutical Companies

Abstract

The pharmaceutical industry, concerned about the impact of its activity, has integrated responsible principles and practices with a view to improving its sustainable and financial performance. This study analyzes the relationship between environmental, social, governance, and controversy indicators and financial performance, measured through return on equity (ROA), return on assets (ROE), and Tobin’s Q, which are applied to the listed companies in the Nasdaq US Smart Pharmaceuticals Index. This index is composed of 30 international companies with a presence at the global level. All the data have been extracted from the Thomson Reuters database. The analysis was performed using structural equation modeling implemented with partial least squares. The results confirm the positive relationship between the construct composed of environmental, social, and governance (ESG) indicators and the aforementioned financial ratios. Additionally, a positive relationship of the controversy indicator with Tobin’s Q is supported. This suggests that the pharmaceutical multinationals focus their investments in sustainability on ESG and pay attention to controversies to boost the visibility of the company and thus increase its value. These conclusions confirm that investing in ESG is a profitable strategy. It is also relevant for managers as it increases the profits and the market value of multinational pharmaceutical companies.

Theconcave–convexeffects of environmental, social and governance onhigh‐techfirm value: Quantile regression approach

“…The empirical research addressing the ESG‐FV relationship is inconclusive and proposes contradictory results. One argument suggests there is a positive link between ESG and FV and that being socially responsible improves performance (Yu et al, 2018; Brogi & Lagasio, 2019; Conca et al, 2021; Irawan & Okimoto, 2021; López‐Toro et al, 2021; Okafor et al, 2021; Wong et al (2020)). In line with the results of these studies, ESG initiatives can help firms to better meet the interests of their stakeholders (Lee et al, 2013) and produce competitive advantages (Irawan & Okimoto, 2021).…”

A Narrative Review of Plastic Surgery and Climate Change: Context and Considerations

“… 55 Plastic surgery may similarly reap value gains through environmental investments, as has been seen in the pharmaceutical industry. 56 …”

“… 11 , 13 Notably, although up-front costs will certainly be needed to enact and drive innovation, downstream returns and cost-savings are both likely and possible in this field. 24 , 56 , 66 …”

“…55 Plastic surgery may similarly reap value gains through environmental investments, as has been seen in the pharmaceutical industry. 56 The literature to date largely lacks attribution of climate change, specifically, to downstream effects on procedures. As a result, this is likely not an exhaustive list for the ways in which climate change may impact plastic surgery and will be an area of much needed future research.…”

Too little or too much? Exploring the inverted U-shaped nexus between voluntary environmental, social and governance and corporate financial performance

“…Therefore, a firm's engagement towards a larger society through ESG concerns will reap sustainable benefits. As a result, there is a positive ESG-CFP nexus (López-Toro et al, 2021;Wong et al, 2021). On the other hand, Friedman (1970) argues that ESG causes under-allocation of resources due to agency problems, increasing additional costs for enterprises implementing ESG (Kumar et al, 2022).…”