Environmental, social and governance initiatives and wealth creation for firms: An empirical examination

Kumar, Raj; Ting, Irene Wei Kiong; Sukumaran, Sujit K; Sumod, S D

doi:10.1002/mde.3131

Cited by 65 publications

(48 citation statements)

References 115 publications

(118 reference statements)

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“…By examining 4,886 firms from emerging and developed countries and applying a two-stage least square model, Bhaskaran et al (2020) confirmed that companies investing in ESG projects tend to enhance their market value. The authors highlighted other factors strengthening these relationships.…”

Section: Literature Reviewmentioning

confidence: 86%

“…The reason is that firms operating in sensitive industries are exposed to more control, and they engage in sustainable activities to reduce the negative effect on the environment and to improve their reputation. Furthermore, Garcia et al (2017) highlighted the crucial role of free cash flow in highly positive dependence between ESG initiatives and corporate financial performance (Wong et al, 2021;Bhaskaran et al, 2020). Meanwhile, De Lucia et al (2020) analyzed whether the intensity of ESG practices results in the improved financial performance of public enterprises and confirmed this assumption.…”

Section: Literature Reviewmentioning

confidence: 98%

“…The larger the company, the more resources are available to invest in shareholders' welfare. Further, Bhaskaran et al (2020) emphasized that companies actively investing in welfare initiatives for workers create higher firm value and operating performance because highly motivated workers will demonstrate increased productivity in the more favorable working climate. Some studies have analyzed the relationship between ESG initiatives and the financial performance of companies by country.…”

Section: Literature Reviewmentioning

confidence: 99%

“…ESG initiatives and their disclosure positively affect corporate financial performance by enhancing the relationship with various stakeholders, appealing to new customers and investors, and declining information asymmetry and agency costs (Cheng et al, 2014;Arayssi et al, 2016;Lo and Kwan, 2017;Fatemi et al, 2018;Yu et al, 2018;Nekhili et al, 2017;Bhaskaran et al, 2020;De Lucia et al, 2020;Wong et al, 2021). H1: Investing in ESG projects boosts corporate financial performance.…”

Section: Hypothesesmentioning

confidence: 99%

“…For instance, Cheng et al (2014), Arayssi et al (2016), Shaukat et al (2016), Garcia et al (2017), Yu et al (2018), Fatemi et al (2018), Duque-Grisales and Aguilera-Caracuel (2019), Miralles-Quirós et al (2019), Nekhili et al (2021), Bhaskaran et al (2020), De Lucia et al (2020, and Crespi and Migliavacca (2020) analyzed how investing in ESG projects may boost the market value of a firm and profitability measures, such as return on assets (ROA) and return on equity (ROE). Meanwhile, Sun and Cui (2014), Devalle et al (2017), and Badayi et al (2020) explored the influence of ESG initiatives on the default likelihood.…”

mentioning

confidence: 99%

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Investment in ESG Projects and Corporate Performance of Multinational Companies

Cherkasova

Nenuzhenko

2022

Journal of Economic Integration

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This study investigates whether investing in environmental, social, and governance (ESG) projects boosts corporate financial performance. It also examines whether these projects trigger the company’s default due to the high costs of such projects, depending on whether the firm is multinational and its headquarter region. To obtain robust results, we conduct the examination separately for seven regions: North America, Latin America, Western Europe, Eastern Europe, Middle East and Africa, emerging Asia, and Developed Asia. We examine firm-level indicators of 1,249 companies and are headquartered in different regions for 2011-2019. We find that the company’s headquarter region influences the interrelationship between financial performance and ESG activities. The most successful companies in ESG development are international companies and those headquartered in developing or Developed Asia or North America. Meanwhile, Latin American firms, both local and multinational, experience significant challenges during the implementation of ESG initiatives.

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Section: Literature Reviewmentioning

confidence: 86%

Section: Literature Reviewmentioning

confidence: 98%

Section: Literature Reviewmentioning

confidence: 99%

Section: Hypothesesmentioning

confidence: 99%

mentioning

confidence: 99%

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Investment in ESG Projects and Corporate Performance of Multinational Companies

Cherkasova

Nenuzhenko

2022

Journal of Economic Integration

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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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How can organizations measure the integration of environmental, social, and governance (ESG) criteria? Validation of an instrument using item response theory to capture workers' perception

Barbosa,

Crispim,

da Silva

et al. 2024

Bus Strat Env

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Evaluation of corporate sustainability parameters has become part of organizational management. Item Response Theory (IRT) serves as a valuable approach for quantifying and exploring observable variables associated with these parameters. Therefore, this article aims to propose, apply, and validate an instrument utilizing IRT to measure environmental, social, and governance (ESG) impacts on corporate sustainability performance, using the perspective of workers. Workers were chosen as key stakeholders for the present study, as they were pointed by previous research as central to corporate sustainability decisions. The present paper addresses a literature gap by introducing, implementing, and validating a research instrument, along with a comparative scale, to assess the effects of integrating ESG criteria on corporate sustainability performance. Workers of two major Brazilian electricity sector companies were respondents for this instrument. Multigroup IRT method was used to assess item discrimination and difficulty levels, and to construct a scale reflecting workers' perceptions of integrating ESG criteria. The questionnaire consisted of 15 items, demonstrating Content Validity Coefficients (CVC) above .97, confirming the instrument's content effectiveness. Cronbach's Alpha and McDonald's Omega were greater than .94 for both companies. Questionnaire items demonstrated satisfactory discrimination ability and varying difficulty levels, resulting in a five‐level scale to gauge the impacts of ESG criteria. This research contributes through the introduction and validation of the research instrument, the latent trait assessment scale, and the evaluation of workers' perceptions regarding ESG criteria impacts on corporate sustainability performance. In conclusion, the proposed instrument showed robust psychometric properties, displaying favorable reliability and validity parameters. It effectively measures the impacts of ESG criteria, providing interpretable levels aligned with the unique characteristics of its constituent items

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Environmental, social and governance initiatives and wealth creation for firms: An empirical examination

Cited by 65 publications

References 115 publications

Investment in ESG Projects and Corporate Performance of Multinational Companies

Investment in ESG Projects and Corporate Performance of Multinational Companies

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

How can organizations measure the integration of environmental, social, and governance (ESG) criteria? Validation of an instrument using item response theory to capture workers' perception

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