326 research outputs found

    Environmental, Social, Governance Performance and Negative Performance Feedback: Firm Moderators in a Cross-country Context

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    In this study, we have examined two specific research questions. First, whether firms around the world with negative performance feedback would resort to more environmental, social, governance [ESG] performance or otherwise. Second, we examine whether firms’ ESG controversies and stakeholder orientation in a cross-country context, with distinctive legal system and ethical behaviour, would motivate them to undertake more ESG performance in such negative performance feedback conditions. Our primary findings show that negative performance feedback of a firm impacts its ESG performance in a strongly negative manner. Furthermore, we prove that both high stakeholder orientation and high ESG controversies significant negatively moderate firms’ ESG inclinations. This holds true irrespective of country-specific legal system and ethical behaviour contexts

    Corporate Social Responsibility and Financial Performance, An empirical study

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    In the last few decades, the social impact of the corporate world has become increasingly important to the society. This has resulted into an increased awareness of the corporate social responsibility (CSR) of the corporate world. This has led to an increase in the so- cially responsible investing (SRI) that invest only in CSR compliant assets. At the time of conducting this thesis research, the increased availability of ESG related ratings have be- come increasingly integrated into the traditional data based investment decision process. This thesis is attempting answer the question whether the companies that have a high ESG rating exhibit a superior financial performance. This study initiate this study by re- viewing earlier research results and fundamental theories in both ESG and financial ar- eas. The thesis problem statement is split into research hypothesis. The first hypothesis is trying to understand whether the stocks of companies with high ESG ratings show a better performance than stock of companies with low ESG ratings. The second hypothe- sis tries to understand whether companies with high ESG ratings are significantly ex- posed to the profitability and investment factors of the Fama and French’s six factors asset pricing model. The profitability and investment factors are used as they are con- sidered key measures of the expected return of a corporation. The used ESG related rating that are used in the study encompasses the ESG rating, the ESG 10 sub-categories rating and the newly published ESG controversies rating. The em- pirical analysis is separated into distinct parts. In the first part of the analysis, the ESG and the 10 ESG subcategories rating are considered over the full 15 years form 2006 to 2020. The created portfolios are not rebalanced every year, but the average of the col- lected scores are computed. In the second part, ESG and ESG controversies ratings are considered for the same time period of 2006 to 2020. Initial portfolios based on the 2006 data are created. The outcome of the thesis research is that hypothesis 1 is rejected as the research failed to show that high ESG and high ESG controversies rated portfolios perform better than low ESG and high ESG controversies rated portfolios. The hypothesis 2 is also rejected as the analysis failed to show that ESG rating based portfolios are exposed to the profita- bility factor and that ESG controversy based portfolios are exposed to the profitability and investment factors. This leads the research to concluded that it has not successfully shown that highly ESG related ratings of companies have a positive effect on their stock’s performance

    All you need is G(overnance): Sustainable finance following Ambrogio Lorenzetti’s frescoes

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    This paper takes at firm level the inspiration of the Allegory of the Good and Bad Government, the 14th century series of frescoes by Ambrogio Lorenzetti. As in the frescoes the effects of a good government on the city of Siena and its countryside are portrayed, the goal of this paper is to analyze the effect of a good (corporate) governance on stabilizing financial performance and improving sustainability resilience once controversies related to sustainability issues occur. Focusing on the governance dimension and relating our study to the masterpiece of Ambrogio Lorenzetti allow us to highlight the different philosophical basis between the governance, on one side, and the environmental and social dimension. While the latter are linked to practice, governance is at the connection between practice and ethics. Using a large sample of European listed companies from 2006 to 2019, our results, validated by various robustness checks, confirm that that good (corporate) governance is the key factor not only in getting sustainability controversies managed, therefore increasing firm sustainability resilience, but also in reducing equity volatility, therefore stabilizing firm financial performance

    ESG performance and dividend stability of the world’s largest enterprises

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    PURPOSE: Theoretical and empirical research on corporate sustainability focuses on the relationship between environmental, social, and governance (ESG) performance and profitability or market value; little attention is given to describing their effect on dividend policy. Therefore, the main purpose of this paper is to address the research gap by identifying the relationship between corporate sustainability performance and the stability of dividend payouts. To achieve this goal, we formulated a general research hypothesis that there is a positive link between an enterprise’s ESG performance and its propensity to pay stable dividends. This research hypothesis is operationalized by the following five specific hypotheses: (1) the link between the overall ESG score and the propensity to pay stable dividends is positive; (2) the link between the environmental pillar score and the propensity to pay stable dividends is positive; (3) the link between the social pillar score and the propensity to pay stable dividends is positive; (4) the link between the governance pillar score and the propensity to pay stable dividends is positive; (5) the link between the ESG controversies score and the propensity to pay stable dividends is positive. METHODOLOGY: The hypothesis was empirically verified using a logistic regression model among the world’s largest non-financial enterprises listed in the Global 500 of 2021 for the years 2012–2021. The specifications of the general model include sustainability variables such as environmental, social, and governance pillar scores, as well as the ESG controversies score, which measures an enterprise’s exposure to environmental, social, and governance controversies and negative events reflected in global media. The financial ratios, such as a return on assets, current ratio, and debt-to-equity ratio, are considered control variables in the model specifications. The research was extended by implementing descriptive statistics and Pearson correlation coefficients. All required financial and sustainability data were retrieved from the London Stock Exchange Group (LSEG) Eikon database. FINDINGS: The results of the estimation revealed that: (1) the effect of integrated ESG activities on payout stability is statistically significant and negative only in model specifications without the ESG controversies; (2) the effect of the environmental dimension is statistically significant and negative only when other particular ESG pillars are not considered; (3) the effect of the social dimension is statistically significant and negative, only when the governance dimension and the ESG controversies are not considered together in the same model specification; (4) the effect of the governance dimension is statistically significant and positive only if other particular pillars are considered together in one model specification, both with and without the ESG controversies; (5) the effect of the ESG controversies is statistically significant and positive in each model specification. Therefore, the general research hypothesis cannot be confirmed because only the fifth specific research hypothesis can be positively verified in all model specifications. IMPLICATIONS: Further research should be conducted on the relationship between corporate sustainability performance and dividend policy. It should consider not only commonly applied ESG scores but also the ESG controversies score, which was statistically significant in this research. Governments and international organizations should cooperate with companies that provide ESG data to make ESG scores, including the ESG controversies score, publicly available to all stakeholder groups, which would help to reduce the information gap. Managers should pay more attention to increasing the visibility of ESG initiatives from the perspective of risk, which they allow to avoid controversies in particular corporate sustainability dimensions. ORIGINALITY AND VALUE: The value added of this paper is that it investigates the relationship between ESG performance and payout policy, which was not thoroughly explored in previous studies, especially in the context of an enterprise’s controversial ESG activities. To fill the research gap in the literature, the authors incorporated the ESG controversies score as an independent variable in the model specifications, which is a novelty in research on dividend policy

    Does ESG performance influence a firm's probability of default?

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    This thesis investigates the effects of engagement in ESG (environmental, social, governance) activities on the probability of default by using data from 423 non-financial public European firms between 2000 and 2019. The probability of default proxy is calculated by using the structural model of Merton’s distance-to-default and the measures for ESG Score and ESG Controversies score are obtained from the Refinitiv database. ESG Score is calculated by Refinitiv based on the data provided by each company and compared to peers, while ESG Controversies score is based on controversial ESG events’ information collected by Refinitiv from public media. The statistically significant results support one of the hypotheses that firms with higher ESG scores experience a higher probability of default, while either unobserved firm-related or year-related variables are being fixed. There was no significant evidence found to support the opposite hypothesis that higher ESG scores are negatively related to the probability of default. Another hypothesis that firms with higher ESG Controversies scores have a lower probability of default is also supported by the results of this thesis

    Applying machine learning techniques to identify companies at higher risk of ESG controversy

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    ESG controversies may have enormous consequences for an individual company, its customers, investors, and other stakeholders. The objective of this work is to identify companies at high risk of ESG controversy based on public ESG data. By using machine learning solutions, early indicators in ESG data can be identified that provide insight into how likely a company is to face an ESG controversy. By using Random Forest models, the proportion of companies with a controversy among the flagged companies can be increased by 93, 5.6and 4.3times for the Environmental, Social and Governance pillar, respectively

    Is there a relationship between csr performance and corporate financial performance? An empirical investigation of stoxx 600 europe

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    The research analysis is focused on the relationship between corporate socia

    Essays in corporate risk

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    This thesis explores the dynamic interplay between risk-taking behaviors, corporate sustainability, and corporate governance mechanisms. The first paper demonstrates a causal effect of CEO career concerns on reduced corporate risktaking using regression discontinuity design. It finds that career-concerned CEOs exhibit risk aversion, influencing corporate policies toward safer investments, higher cash reserves, and increased dividends. The second paper illustrates how CEOs facing career anxieties undertake ESG reputational risk management, compromising long-term ESG performance. The third paper shows that higher director nomination eligibility criteria causally reduce stock price crash risk, an effect amplified in non-state-owned firms with lower executive control, volatile share prices, and more retail investors. Collectively, the thesis makes academic contributions to empirical finance and offers practical insights into corporate risk management and investment risk identification for executives, policymakers, and regulators

    As Controvérsias ESG Influenciam o Valor das Empresas? Uma Análise com Dados Longitudinais em Diferentes Países

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    This study aims to analyze the influence of ESG controversies on the value of companies. Annual data from 6,325 companies from 61 countries between 2002 and 2020 were analyzed. In the econometric model developed, the indices prepared by Refinitiv®, made available through the Eikon platform, were used as ESG controversies, in addition to the three variables as proxies of company value: Tobin’s Q, Market-to-Book, and Market Capitalization. The results indicate a negative relationship between ESG controversies, and the value of companies measured by Tobin’s Q and Market Capitalization proxies. Considering that the value of a firm represents the estimation of returns, our findings corroborate the view that controversies produce negative effects on the evaluation of future results. It contributes to the literature by demonstrating that ESG controversies affect companies based on global analysis and a deepening understanding of the impacts of corporate irregularities.Esta pesquisa tem por objetivo analisar a influência das controvérsias ESG no valor das empresas. Foram analisados os dados anuais de 6.325 empresas de 61 países no período de 2002 a 2020. No modelo econométrico desenvolvido utilizaram-se como controvérsias de ESG os índices elaborados pela Refinitiv® e disponibilizados por meio da plataforma Eikon, além das três variáveis como proxy de valor da empresa: Q de Tobin, Market-to-Book e Capitalização de Mercado. Os resultados indicam uma relação negativa entre as controvérsias ESG e o valor das empresas mensurado pelas proxies Q de Tobin e Capitalização de Mercado. Considerando que o valor de uma firma representa a estimação de retornos, os achados corroboram a visão de que as controvérsias produzem efeitos negativos nas avaliações dos resultados futuros. Contribui-se com a literatura ao demonstrar que as controvérsias ESG produzem efeitos para a empresas a partir de uma análise a nível global, além aprofundar entendimentos sobre os impactos das irregularidades corporativas
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