ESG and Corporate Financial Performance within Firms –A dynamic relationship across Markets
Abstract/Description
This paper investigates the effects of ESG performance on the financial performance of companies in emerging and developed markets from 2005 to 2022 for a comparative analysis between the two markets. ESG performance is measured through Refinitiv ESG scores, and financial performance is measured through Tobin’s Q. Firm size and financial leverage are also included as added dimension in the study. We used both linear panel regression analysis and dynamic panel estimation to provide a further value addition to the literature. The findings through simple linear regression analysis suggest that for the both the markets, ESG has a negative and significant impact on the financial performance of firms. The findings also suggest that increase in firm size in developed market reduces the inverse impact of ESG on the financial performance, whereas in the emerging market, there is no significant impact on the relationship between ESG and financial performance. Increase in financial leverage of firms, on the other hand, reduces the inverse impact of ESG on financial performance in both the markets. The similarity of findings in both the markets indicate that the relationship between ESG and financial performance is not different across the markets but follow similar patterns.
Keywords
ESG, financial performance, environmental, social, governance, emerging market, developed market
Track
Finance
Session Number/Theme
1A: Finance
Session Chair
Dr. Adnan Haider; Dr. Aitzaz Ahsan Alias
Start Date/Time
30-5-2024 1:50 PM
End Date/Time
30-5-2024 3:20 PM
Location
MCS – 3 AMAN CED Building
Recommended Citation
Tauseef, S., & Sabih, R. (2024). ESG and Corporate Financial Performance within Firms –A dynamic relationship across Markets. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2024/program/3
COinS
ESG and Corporate Financial Performance within Firms –A dynamic relationship across Markets
MCS – 3 AMAN CED Building
This paper investigates the effects of ESG performance on the financial performance of companies in emerging and developed markets from 2005 to 2022 for a comparative analysis between the two markets. ESG performance is measured through Refinitiv ESG scores, and financial performance is measured through Tobin’s Q. Firm size and financial leverage are also included as added dimension in the study. We used both linear panel regression analysis and dynamic panel estimation to provide a further value addition to the literature. The findings through simple linear regression analysis suggest that for the both the markets, ESG has a negative and significant impact on the financial performance of firms. The findings also suggest that increase in firm size in developed market reduces the inverse impact of ESG on the financial performance, whereas in the emerging market, there is no significant impact on the relationship between ESG and financial performance. Increase in financial leverage of firms, on the other hand, reduces the inverse impact of ESG on financial performance in both the markets. The similarity of findings in both the markets indicate that the relationship between ESG and financial performance is not different across the markets but follow similar patterns.
