Understanding the Impact of ESG Practices in Corporate Finance

Kim, Sang; Li, Zhichuan

doi:10.3390/su13073746

Cited by 149 publications

(99 citation statements)

References 19 publications

(22 reference statements)

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“…However, some studies have found that good ESG scores correlate with higher returns on the shares of respective companies, with a lower risk for companies with good credit ratings [45][46][47]. Sassen and co-authors conducted a study of 8752 European companies and identified that companies that increased their ESG scores had the potential to increase their company value, the vector showing that the impact of ESG on company risk tended to decrease at high ESG values [48].…”

mentioning

confidence: 99%

Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach

2022

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The main goal of this study was to measure the impact of the environmental, social, and governance (ESG) sustainability score and value added to companies’ market capitalization. Therefore, financial and sustainable performance were measured in a sample of 5557 companies divided into 9 economic sectors of activity from 78 countries and 6 regions (Americas: 2144; Asia: 1770; Europe: 1232; Oceania: 311; Africa: 90; United Kingdom: 10). The analyzed sample consisted of publicly traded companies ranked by market capitalization (from small-cap to large-cap), for which the ESG score was measured in the analyzed period: the financial year was 2019, before the advent of the COVID-19 pandemic. Using two methods (multiple linear regression and complementary quantile regression), we found a direct link between the ESG score and value added variables and market capitalization, with distinct impacts at the economic sector level for ESG score and relatively constant impact for value added.

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confidence: 99%

Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach

2022

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“…First, we examine how corporate ownership and equity funds are (involuntarily) responsible for investment in the firms that are deemed problematic with the ESG (Environment, Society and Governance) standards. While the literature has recognized that “ESG is being incorporated into other portfolio products, such as ETFs” in the last several years [ 20 ], and the scholarly literature has exclusively addressed the impact of ESG scores on the financial performance of ETFs, corporate profitability, and investment decision-making among others [ 21 , 22 ]. Our analysis differs from the existing studies in that we study the connectivity of corporate ownership and investment funds to non-ESG firms, rather than the impact of ESG standards.…”

Section: Discussionmentioning

confidence: 99%

Socially responsible investing through the equity funds in the global ownership network

et al. 2021

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We analyze the connectivity of equity investments to the firms in the global ownership network that are reported as non-compliant with Environment, Social, and Government (ESG) benchmarks. We find that a large number of shareholders have ownership linkages to non-ESG firms, most commonly with three or four degrees of separation. Analyzing the betweenness centrality for shareholders connecting the ultimate owners and non-ESG firms, we find that the investment management companies play important roles in channeling the investment money into non-ESG firms, where largest American asset managers commonly have one to two degrees of separation on their ownership linkages to those problematic firms. Since asset managers collect capital from investors by running the equity funds, we analyze the ownership stakes and the associated voting rights attributable to the equity funds investors. We estimate the distribution of the power of corporate control over non-ESG firms among specific asset managers (such as BlackRock and Fidelity) and among different types of the equity funds (such as mutual funds and exchanged-traded funds), and explores how investing in the equity funds rather than ownership investing may have shifted the distribution of the power to control those non-ESG firms.

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“…Moreover, in banks, only Environmental disclosure has been cited to have a positive impact on the performance of the underlying asset. However, for Social and Government aspects individually, a negative effect is observed [22,23]. This may be seen as a contradiction, as the previous paragraph referenced a different point of view on the individual effects of ESG factors, but these results can in fact coexist as: (a) in one case, the article is examining the connection between ESG and stock performance, whilst the other researches ESG and CFP; (b) these results illustrate the current developing nature of research on ESG, CSR-particularly their effects on underlying assets.…”

Section: Esg Effects On Cfpmentioning

confidence: 95%

Financial Stability in Companies with High ESG Scores: Evidence from North America Using the Ohlson O-Score

et al. 2022

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The benefits and advantages of the incorporation of ESG (Environmental, Social, Governing)-related policies have been discussed extensively. However, research articles focus not only on the socioecological aspects of Corporate Social Responsibility (CSR) but also on the underlying effects on a corporation’s corporate financial performance (CFP). In this regard, the current study aims to analyze the impact of ESG parameters on corporations’ financial stability. A sample size of 691 companies in North American countries was investigated in order to test the hypothesis that ESG has an effect on the likelihood of a company going bankrupt using the Ohlson O-score. This is conducted using regression models and the Pearson correlation coefficient. Furthermore, a follow-up hypothesis on the relationship between firm size and ESG is also tested in order to evaluate a tendency of corporate growth through ESG-based sustainable development. The results of the study conclude that the governing pillar of ESG factors has the highest positive impact on corporations’ financial success. Furthermore, the analysis conducted in the study with its sample size confirms the hypothesis that larger firms tend to have higher ESG scores.

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Understanding the Impact of ESG Practices in Corporate Finance

Cited by 149 publications

References 19 publications

Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach

Environment, Social, and Governance Score and Value Added Impacts on Market Capitalization: A Sectoral-Based Approach

Socially responsible investing through the equity funds in the global ownership network

Financial Stability in Companies with High ESG Scores: Evidence from North America Using the Ohlson O-Score

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