Is the corporate financial strategy in the oil and gas sector affected by ESG dimensions?

Purpose This study aims to investigate the association between board diversity and systematic risk. The theoretical framework used in this study is based on agency and resource dependency theories.Design/methodology/approach Using a panel data set of 788 firms listed in the Morgan Stanley Capital International (MSCI) Emerging Markets index from 2015 to 2020, the authors apply Panel-Corrected Standard Error estimation method to test the three proposed hypotheses and the two-stage least squares method is adopted for the endogenous test.Findings The results suggest that board-specific skills diversity (BSSD) and board independence (BIND) have a negative impact on systematic risk. On the other hand, board gender diversity does not affect systematic risk. The findings reinforce the relevance of board diversity for reducing systematic risk and offer valuable insights for policymakers and investors, suggesting that the presence of directors with specific skills and independent directors could reduce firms’ systematic risk.Research limitations/implications The study extends the scope of agency and resource dependency theories by suggesting that the BSSD and BIND reduce agency costs and bring critical resources to the firm’s survival.Practical implications The findings support policymakers and managers in reducing systematic risk. In addition, the results demonstrate the importance of policies that encourage board diversity and BIND.Social implications The study demonstrates how companies can reduce systematic risk through board diversity and BIND.Originality/value To the best of our knowledge, this is the first study to investigate the association between board diversity and systematic risk only in emerging markets.

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“…, 2010). CAPM beta estimates how much a stock varies for a market move (Ramírez-Orellana et al. , 2023).…”

Section: Methodsmentioning

confidence: 99%

Board diversity and systematic risk: evidence from emerging markets

Daniel‐Vasconcelos

Crisóstomo

Ribeiro

2023

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“…The short-term effects of ESG score on market value can be studied using the CL effects system dynamics model, which allows for the analysis of complex systems with feedback loops [51,52]. Several recent studies have used this approach to explore the dynamics of the relationship between market value and ESG score [41,49,[53][54][55][56][57][58][59]. For instance, a study by [53] found that an increase in a firm's ESG score leads to an increase in its market value, which in turn leads to an increase in the firm's ESG score.…”

Section: Short-term System Dynamicsmentioning

confidence: 99%

Analyzing the Dynamic Relationship Between ESG Scores and Firm Value in Chinese Listed Companies: Insights from Cross-Lagged Analysis

Wedajo,

Bhat,

Khan

et al. 2023

Preprint

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The relationship between a company's Environment, Social and Governance (ESG) scores and market value dynamics has been the focus of extensive research. Our study aimed to provide insights into this relationship and its implications for Chinese investors. We used a general Cross-lagged panel model to analyze data from 652 Chinese-listed companies from 2013 to 2019. Our findings indicate that ESG scores have a long-term impact on market value, with a consistently positive correlation between the two. We also discovered that Chinese investors consider ESG factors when evaluating a company's financial health. Companies that prioritize ESG factors are more likely to attract investment. Moreover, the diffusion of ESG information happens slowly, and past ESG performance influences future ESG performance. Thus, maintaining good ESG performance is crucial for long-term sustainability and success. Overall, our study highlights the importance of considering ESG factors when evaluating financial health and making investment decisions, providing valuable insights for firms and investors alike.

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“…When studying the activities of the oil and gas sector, Spanish scientists found a positive relationship between the environmental and managerial aspects of ESG and corporate financial strategy, market value of companies, financial performance, and financial risks (Ramírez-Orellana et al, 2023).…”

Section: Literature Reviewmentioning

confidence: 99%

Effective ESG Transformation of Russian Companies in the New Environment: Current Challenges and Priorities

Babynina,

Kartashova,

Busalov

et al. 2023

Acad. J. Interdiscip. Stud.

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This research aims to analyze the current problems of ESG transformation in Russia, focused on identifying priorities in solving the problems of sustainable development of Russian companies using ESG tools in the context of geopolitical changes. The authors illustrate the results of a comparative analysis of the ESG assessment methodologies of four Russian rating agencies and prove their methodological limitations regarding the use of subject areas, the comparability of specific ESG factors and their weights, analytical controversies, and categories of rating scales. The authors propose a new conceptual approach for the formation of a statistical base, which was tested during the research. The scientific novelty of this approach lies in the application of additional criteria in the analysis of non-financial information using quantitative and qualitative methods. This made it possible to structure the non-financial information obtained as a result of a survey among 118 Russian companies. The formulated questions of the questionnaire and the companies’ answers provide an opportunity to see the limitations and promising directions for the transformation of the company’s activities using the principles of sustainable development and ESG tools. The main research results include a created database, the users of which can determine the most significant ESG factors according to the following criteria: 1. industry affiliation; 2. legal form; 3. number of employees; 4. income; 5. availability of ESG policies and reporting; and receive an average response rating on a 10-point scale. As a result of a combination of answers, the ranking score of ESG blocks was determined in descending order of points: 8.0 points - S (Social); 7.8 points - G (Corporate Governance); 7.4 points - E (Environment). This research indicates promising directions for the development of a unified methodology for assigning ESG ratings for various rating agencies, including the differentiation of indicators and their weights for various industries. Received: 20 July 2023 / Accepted: 20 October 2023 / Published: 5 November 2023

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Is the corporate financial strategy in the oil and gas sector affected by ESG dimensions?

Cited by 22 publications

References 95 publications

Board diversity and systematic risk: evidence from emerging markets

Board diversity and systematic risk: evidence from emerging markets

Analyzing the Dynamic Relationship Between ESG Scores and Firm Value in Chinese Listed Companies: Insights from Cross-Lagged Analysis

Effective ESG Transformation of Russian Companies in the New Environment: Current Challenges and Priorities

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