Reassessing the Impact of ESG Practices on Financial Performance: A Comprehensive Analysis
Current Topics in Finance: Insights on Evolving Markets and Practices, Aslı Togan Eğrican, Editör, Scala Yayıncılık, İstanbul, ss.165-215, 2024
- Yayın Türü: Kitapta Bölüm / Araştırma Kitabı
- Basım Tarihi: 2024
- Yayınevi: Scala Yayıncılık
- Basıldığı Şehir: İstanbul
- Sayfa Sayıları: ss.165-215
- Editörler: Aslı Togan Eğrican, Editör
- TED Üniversitesi Adresli: Evet
Özet
In this chapter, we revisit the effect of Environmental, Social, and Governance (ESG) practices on firms’ financial performances by using a sample of approximately 7000 firms across 41 countries from 2002 to 2019. The financial performance is measured by four dependent variables: Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), and Market-to-Book Ratio (MTBV). We compile the ESG data from Refinitiv Eikon and financial data from Datastream. The fixed-effects regression models are run for different samples, including 1) full sample, 2) by industry, 3) by development level, and 4) by period. For the full sample, we report that ESG combined score positively and significantly affects firm financial performance. The environmental pillar score affects EPS and MTBV significantly positive, and social pillar score has positive and significant effect on ROA, ROE and MTBV. We do not report a significant effect of governance pillar score on the financial performance. However, the outcomes vary across different sub-samples, meaning that the relationship between ESG practices and financial performance depends on the sample that we uses.