ESG Importance for Long-Term Shareholder Value Creation: Literature vs. Practice

Abstract

This article aims to detect how ESG adds value to the long-term shareholder value creation and to discover whether businesses are aware of positive ESG effects and, therefore, whether they will become more ESG-conscious. By conducting a qualitative content analysis on the academic literature, this article firstly aims to determine if shareholders’ value is positively affected by corporate ESG awareness. Secondly, to test whether companies are becoming more conscious about the importance of ESG, the mission statements of publicly listed Central and Eastern European (CEE) companies are compared to their decade-old versions. This analysis allows us to conclude on whether companies have shifted their attention to the ESG factors as a part of their purpose of existence and, therefore, for long-term shareholder value creation, which is one of the main goals of the exchange-listed enterprises. The content analysis results show that companies with higher sustainability awareness ensure shareholder value creation via improved financial performance, management quality as well as reduced risk metrics. Additionally, qualitative nonfinancial factors such as reputation, stakeholder trust, employee satisfaction and engagement provide an even more significant effect on the long-term value than the pure financial matters. The theoretical trend is found to be supported by the fact that sustainability practice and consumer-oriented keywords dominate the mission statements of CEE companies, while keywords related to shareholders and profit experienced the most significant decrease from 2012 to 2021. The present research is unique as it looks at how companies tend to become more ESG aware, integrating the sustainability perspective into their mission statements in response to the global sustainability trend.

Effect of Computer Assisted Audit Tools on Corporate Sustainability

“…Given the rise of several theories to support companies' mission statements-shareholder theory and stakeholder theory-Zumente and Bistrova [1] suggest that shareholder value creation should be supported by putting more attention in a long-term orientation instead of a short-term one. Hence, the company should be concerned about its actions in the long term in order to assure its presence in the economy, thus acting in a more sustainable and responsible way [25].…”

“…Over the years, the goals of companies have changed considerably [1], leading to the rise of theories that describe the core corporate objective-shareholder theory developed by Friedman [2] and stakeholder theory developed by Freeman [3]. The shareholder theory focuses on financial goals leading to shareholder value maximization, and the stakeholder theory suggests the firm ought to maximize its value with more associated responsibility, thus creating value for all stakeholders.…”

“…The shareholder theory focuses on financial goals leading to shareholder value maximization, and the stakeholder theory suggests the firm ought to maximize its value with more associated responsibility, thus creating value for all stakeholders. Zumente and Bistrova [1] warn that sustainability and long-term value creation are the key drivers to a firm's commitments to its stakeholders. Therefore, firms should contribute for the well-being of society as for the environment.…”

“…This paper proposes a study of the relationship between the adoption of CAATs by internal auditors and corporate sustainability. The specific objectives of the paper are (1) to identify the CAATs used by internal auditors, (2) to study the effect of CAATs in corporate sustainability, and (3) to analyze the moderating effect of company characteristics in the relationship between CAAT adoption and corporate sustainability.…”

Differences in Readability, Keywords, and Orientation of Mission Statements of the Top 100 Korean and Top 100 US Traditional and Innovative Companies

“…The top 100 US companies also showed relatively low eigenvector centrality in concern for employees, indicating that more direct elements such as philosophy, product, service, and survival were expressed with relatively higher importance than employees in the mission statements. Recently, environmental, social, and governance (ESG) has emerged as a key issue of corporate management in terms of sustainability, and an increasing number of companies are presenting separate ESG mission statements [53]. There was little difference in mission statement orientation between Korean traditional companies and the top 100 Korean companies.…”