Abstract Studying Corporate Environmental, Social and Governance responsibility (ESG) and its consequences remain a topical concern of the company’s stakeholders including governmental and non-governmental organizations, investors and researchers over the past few decades. While most research has studied and validated the beneficial effect of ESG on financial performance. The few studies that have explored the nexus between financial performance and ESG relationship are conducted in a double causality framework. Thus, this research fills this gap by studying the effect of financial performance on ESG. Using a random-effects panel data model for more than 10,000 firm-year observations of 504 U.S. firms during the period 2000–2020, the results show a positive relationship between financial performance and ESG. Furthermore, cash holding, minority interest and inflation have significantly the expected sign. Yet, the market-to-book value seems insignificant. Interestingly, during periods of high economic policy uncertainty, oil price uncertainty and leverage, the impact of companies’ financial performance on ESG decreases differently according to the three components of the ESG. These findings are robust and consistent with alternative econometric specifications and alternative measures of dependent variable and control variables.

https://doi.org/10.1080/23311975.2022.2154053

Does corporate financial performance promote ESG: Evidence from US firms

PurposeThis study investigates the determinants of net interest margin (NIM) and tests the decoupling hypothesis in Turkey's Islamic and conventional banks.Design/methodology/approachThis study has employed a panel quantile model (PQM) to assess the net interest margin (NIM) and test the decoupling hypothesis in the dual banking system of Turkey.FindingsThe empirical results show that the impact of equity is positive for both Islamic and conventional banks but relatively more robust for Islamic banks. Moreover, it is observed that return on assets has a positive association with NIM in both types of banking systems. Interestingly, the impact increases from lower to higher quantiles, but a higher acceleration rate is observed for Islamic banks. The study also finds that, as bank stability increases, NIM decreases for both groups of banks but more stably for Islamic banks, resulting in lower margins than conventional banks. Thus, the paper confirms the decoupling hypothesis and suggests that, to increase profit margins, Islamic banks need to increase assets and equity.Practical implicationsThe paper confirms the decoupling hypothesis and suggests that to increase profit margin, Islamic banks need to increase assets and equity.Social implicationsSince both equity and assets contribute positively to interest margins, policymakers in the industry need to increase the size of equity and assets to get maximum returns.Originality/valueThis is one of the first studies to investigate NIM's determinants and test the decoupling hypothesis in the Turkish dual banking system using a non-parametric MCMC panel quantile regression (QRM) model.

Are Islamic and conventional banks decoupled? Empirical evidence from Turkey

The moderating role of CEO power on the relationship between environmental, social and governance disclosure and financial performance in emerging market.

Disclosing information on environmental, social, and governance (ESG) parameters is voluntary for most firms across the world. Companies disclose their performance on ESG datapoints due to two main reasons—(i) to gain the trust of stakeholders through increased transparency and (ii) to comply with regulations imposed by governments and investment houses. Using a dataset of companies disclosing ESG parameters during 2014–2021 from the S&P BSE 500 index, this study investigates the role of ESG disclosure on firm performance. We divide the constituent securities into three factors—size, value, and disclosure to study the premiums generated by firms on each factor using single-, double-, and triple-sorting approaches. We utilize time series regressions along with GRS tests to empirically test the presence of factor premiums. We find the significant role of factors size, value, disclosure, and a dummy variable for the COVID-19 pandemic period to explain the portfolio returns. The study found a negative ESG disclosure premium stating that firms with high levels of disclosure earn less returns compared with the firms with less disclosures. The findings of this study contrast with multiple studies in the past that have found a positive disclosure premium. Our findings help reconcile the mixed evidence on the disclosure–returns relationship.

ESG Disclosure and Firm Performance: An Asset-Pricing Approach

In recent years, the model of extensive economic development at the expense of the ecological environment has been gradually abandoned by all countries in the world. Green economic transformation has become the basic consensus of societies worldwide. Capital is the blood of enterprise development. The rapid development of the green economy with the goal of supporting the green transformation of the economy has increased the financing pressure of enterprises caused by pollution. This paper explores the internal relationship between corporate green behavior decision-making and corporate green financing constraints from a micro perspective. Based on the data of China’s A-share manufacturing industry from 2011 to 2019, this paper examines the impact of corporate ESG performance on the green financing constraints for it. The empirical results show that the listed companies face greater green financing constraints at present. The overall performance of corporate ESG is conducive to easing corporate green financing constraints, but the role of ESG sub-performance is limited. At the same time, there are regional and scale differences in the mitigation effect of the performance of corporate ESGs on green financing constraints. Finally, this paper puts forward policy suggestions on how to promote the alleviation of corporate green financing constraints. Namely: (1) enterprises should improve themselves by improving technological innovation and utilization rate to meet the requirements of green development; and (2) relevant institutions shall formulate appropriate policies and conduct reasonable supervision according to the differentiated requirements of enterprises with different characteristics in different regions.

Can ESG Performance Alleviate the Constraints of Green Financing for Chinese Enterprises: Empirical Evidence from China’s A-Share Manufacturing Companies

ABSTRACT The study attempts to empirically investigate the impact of ESG score on the financial variables that may affect the performance of firms in the Indian context; SEBI’s recent mandate on ESG reporting by the listed entities being the point of departure for the present discourse. A representative sample of 48 Indian firms having ESG scores under BSE-100 index is used in the analysis. The study period comprises the years 2011–2019. Static and dynamic panel regression analyses are conducted. The financial performance variables incorporated in this paper include ROA, ROE, firm size, market capitalization, PBDIT, Tobin’s Q and share price. It is demonstrated that ESG score influences these variables, however with time lags. The distinctive contribution of the current endeavour lies in establishing a long-term positive association between ESG disclosure and annual average share price for the listed firms in a developing economy like India. The results are implicative of the fact that ESG score is an emerging indicator for conceiving future financial performance and risk mitigation strategies, and therefore, of considerable importance from policy perspective.

Impact of ESG score on financial performance of Indian firms: static and dynamic panel regression analyses

The study renews the debate over trade openness and environmental quality by empirically examining the moderating role of environmental SDGs, viz., affordable and clean energy (SDG 7) and climate action (SDG 13), in South Asia. Static panel regression analysis is undertaken, followed by a panel ARDL approach and the Engle-Granger causality test. All eight South Asian countries and a study period of 2002–2019 constitute the panel data set for the present analysis. The result suggests that while SDG 7 is a game changer in doing away with the pollution haven, the moderating impacts of SDG 7 and SDG 13 further reinforce the EKC hypothesis in the region. Both SDG 7 and SDG 13 exhibit long-run moderating effects on the pollution haven, and SDG 13 is observed to have a short-run moderating causal impact. The novel introduction of environmental SDGs to resolve the classical trade and environment debate has policy implications for simultaneous advancements towards SDG 7 and SDG 13. The study is valuable from the perspective of international cooperation, particularly when South Asian economies are not beyond the gloom of global permacrisis. 

Rupamanjari Sinha Ray

Papers

Impact of ESG score on financial performance of Indian firms: static and dynamic panel regression analyses

Can environmental SDGs moderate trade and environment nexus? A South Asian context based on panel ARDL approach

Corporate governance practices in the mining industry of India: an application of CG index