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ESG activities and firm cash flow

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  • Gregory, Richard Paul

Abstract

I measure the influence of ESG activities on Free Cash flow to the Firm and Free Cash Flow to Equity. I find that ESG activities primarily benefit the cash flows to creditors of firms in developed markets. The ESG effect predominantly comes from the excess spending of the firm on communicating how it integrates the economic (financial), social and environmental dimensions into its day-to-day decision-making processes. For developed market firms, the additional factor of excess spending on conditions for the workforce plays a role in boosting Free Cash Flow to the Firm.

Suggested Citation

  • Gregory, Richard Paul, 2022. "ESG activities and firm cash flow," Global Finance Journal, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:glofin:v:52:y:2022:i:c:s104402832100096x
    DOI: 10.1016/j.gfj.2021.100698
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    1. Ajit Dayanandan & Han Donker & Sudershan Kuntluru, 2024. "IFRS and ESG Disclosure in Indian Corporate Sector," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(2), pages 143-169, June.
    2. Ni, Yinan & Sun, Yanfei, 2023. "Environmental, social, and governance premium in Chinese stock markets," Global Finance Journal, Elsevier, vol. 55(C).
    3. Mu, Weiwei & Liu, Kefu & Tao, Yunqing & Ye, Yongwei, 2023. "Digital finance and corporate ESG," Finance Research Letters, Elsevier, vol. 51(C).
    4. Umar, Muhammad & Mirza, Nawazish & Rizvi, Syed Kumail Abbas & Naqvi, Bushra, 2022. "ESG scores and target price accuracy: Evidence from sell-side recommendations in BRICS," International Review of Financial Analysis, Elsevier, vol. 84(C).
    5. Ye Lim Jung & Hyoung Sun Yoo, 2023. "Environmental, social, and governance activities and firm performance: Global evidence and the moderating effect of market competition," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 2830-2839, November.
    6. Irina S. Belik & Anton S. Dutsinin & Natalia L. Nikulina, 2022. "Financial state and investment attractiveness of Russian public companies: The effect of ESG factors," Upravlenets, Ural State University of Economics, vol. 13(6), pages 44-55, January.
    7. Qian, Kun & Shi, Bingjie & Song, Yunling & Wu, Hao, 2023. "ESG performance and loan contracting in an emerging market," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    8. Jiahui Su & Yidi Sun, 2023. "An Improved TOPSIS Model Based on Cumulative Prospect Theory: Application to ESG Performance Evaluation of State-Owned Mining Enterprises," Sustainability, MDPI, vol. 15(13), pages 1-20, June.
    9. Sakkakom Maneenop & Chaiyuth Padungsaksawasdi & Sirimon Treepongkaruna, 2024. "Co‐opted board, environment, social and governance," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 1161-1172, February.
    10. Song, Yunling & Wu, Hao & Ma, Yan, 2023. "Does ESG performance affect audit pricing? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Free cash flow; Sustainability; Corporate financial performance; Corporate social responsibility;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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