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

Șerban, Radu-Alexandru; Mihaiu, Diana Marieta; Țichindelean, Mihai

doi:10.3390/su14042069

Cited by 13 publications

(14 citation statements)

References 48 publications

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“…In a nutshell, ESG indicators are non-financial factors that have become increasingly important and popular among investors (Serban et al, 2022). Furthermore, these academics and industry experts have employed a variety of terms within the category of ESG; however, regardless of whether the word is Socially Responsible Investing (hereafter SRI), Corporate Social Performance (hereafter CSP), or ESG, the studies assess sustainability by measuring roughly the same metrics.…”

Section: Literature Review Importance Of Environmental Social and Gov...mentioning

confidence: 99%

“…However, the authors of this paper considered the value of a company to be given by market capitalisation for the following rationale: if investors guide their investments in company shares by applying investing principles, then the impact of investment decisions influences the market price of shares and, consequently, a company's market capitalisation. In previous literature and practical approaches, market capitalisation is considered a metric for establishing the value of a company from a market perspective (Serban et al, 2022).…”

Section: Measures Of Financial Performancementioning

confidence: 99%

“…Investors request new tools to evaluate companies' performance from an ESG perspective as the ESG market grows. Although reporting an ESG indicator is not mandatory in annual company statements, more companies are reporting their progress in terms of corporate sustainability (Serban et al, 2022). However, ESG substantially limits investors' options because companies perform well in terms of stock market price but act against the practices supported by the ESG framework (Serban et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

“…Although reporting an ESG indicator is not mandatory in annual company statements, more companies are reporting their progress in terms of corporate sustainability (Serban et al, 2022). However, ESG substantially limits investors' options because companies perform well in terms of stock market price but act against the practices supported by the ESG framework (Serban et al, 2022). According to Serban et al (2022), the ESG indicator's objective is to highlight that these practices lead to superior company performance beyond ethical concerns.…”

Section: Introductionmentioning

confidence: 99%

“…However, ESG substantially limits investors' options because companies perform well in terms of stock market price but act against the practices supported by the ESG framework (Serban et al, 2022). According to Serban et al (2022), the ESG indicator's objective is to highlight that these practices lead to superior company performance beyond ethical concerns.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

A Literature Review on ESG Score and Its Impact on Firm Performance

Halid¹,

Rahman²,

Mahmud³

et al. 2023

IJARAFMS

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Research covering Environmental, Social, and Governance (hereafter ESG) and financial performance often suffers from inconsistent terminology and jargon. ESG refers to companies and investors incorporating environmental, social, and governance issues into their business. Meanwhile, the ESG score is an innovative method of evaluating a company's activities. The ESG score focuses not on financial reporting, which investors and managers are accustomed to using when making decisions, but on statements on the corporation's influence on the underlying pillars of the score. Stakeholders and fund managers believe that firms with high ESG scores yield better operating performance, higher returns, and lower firm-specific risk. But still, abundant inconclusive evidence attracts sustainability scholars to fill concerning sustainability disclosure and performance. Therefore, this paper examines the need for overall ESG scores and their impact on the firm performance of listed companies. It shows that there are both positive and negative relationships between ESG scores and firm performance. The author intends to continue research by formulating the hypotheses for analysing the influence of overall ESG scores on firm performance and proposing a model for analysing this correlation. The findings of this study will be helpful to investors, policymakers, and other related agencies and widen the scope of literature to examine the impact of overall ESG scores on their accounting performance (ROA and ROE) and market valuation (Market Capitalisation).

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Section: Literature Review Importance Of Environmental Social and Gov...mentioning

confidence: 99%

Section: Measures Of Financial Performancementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

A Literature Review on ESG Score and Its Impact on Firm Performance

Halid¹,

Rahman²,

Mahmud³

et al. 2023

IJARAFMS

View full text Add to dashboard Cite

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Sustainable development and firm value: How ESG performance shapes corporate success—a systematic literature review

Li,

Saat,

Khatib

et al. 2024

Bus Strat Dev

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This study is designed to conduct a systematic literature review aimed at assessing the influence of environmental, social, and governance (ESG) performance on firm value. Although previous studies have explored their relationship, a comprehensive systematic review on this topic is still lacking. We conducted a detailed literature search in the Scopus and Web of Science databases and identified 73 papers published between 2016 and 2023 as the sample, covering annual trends, country and industry distribution, theoretical frameworks, proxy variables, research methods, research results, and provided direction for future research. We found a significant increase in the number of studies over the past 3 years. Cross‐country studies dominated the field, with most research adopting multi‐industry analysis, while studies focusing on a single industry were relatively rare. The stakeholder theory and agency theory were the most widely applied theories. Most studies showed that ESG performance had a positive effect on firm value, reflecting the growing importance that markets and investors placed on ESG performance and its contribution to long‐term firm growth. However, some studies reported negative or insignificant effects, noting that the effects of ESG performance varied by industry, region, and market environment. This study suggests that future research should explore the independent and interactive effects of each ESG dimension on firm value, focusing on dynamic relationships across industries and regions, using new methods and models, and incorporating moderating variables. This study provides practical guidance for firm managers and policymakers to optimize ESG practices, enhancing firm value and promoting sustainability.

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The impact of ESG factors on financial efficiency: An empirical analysis for the selection of sustainable firm portfolios

Iazzolino

Bruni

Veltri

et al. 2023

Corp Soc Responsibility Env

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Environmental, Social, and Governance (ESG) factors are increasingly at the center of corporate and investment decisions. In this context, the aim of the paper was to test whether ESG factors impact on financial efficiency of a sample of firms belonging to different European sectors. This study enriches the literature of the field through a multi-sectoral analysis. The Data Envelopment Analysis was used as widely considered in empirical and financial studies. Research findings showed that ESGs impact on firm efficiency differently over sectors: some of them are more sensitive than others to ESG factors. Furthermore, for most sensitive sectors the risk-return characteristics related to ESGs were represented in order to provide insights for investors aiming to construct efficient and sustainable firm portfolios to invest in.

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

Cited by 13 publications

References 48 publications

A Literature Review on ESG Score and Its Impact on Firm Performance

A Literature Review on ESG Score and Its Impact on Firm Performance

Sustainable development and firm value: How ESG performance shapes corporate success—a systematic literature review

The impact of ESG factors on financial efficiency: An empirical analysis for the selection of sustainable firm portfolios

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