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ESG Ratings and Financial Performance in the Global Hospitality Industry

Author

Listed:
  • Kefan Lu

    (College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325060, China)

  • Cagri Berk Onuk

    (College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325060, China)

  • Yifei Xia

    (College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325060, China)

  • Jianing Zhang

    (College of Business and Public Management, Wenzhou-Kean University, Wenzhou 325060, China
    Quantitative Finance Research Institute, Wenzhou-Kean University, Wenzhou 325060, China
    Center for Big Data and Decision-Making Technologies, Wenzhou-Kean University, Wenzhou 325060, China)

Abstract

Existing research critically examines the influence of environmental, social, and governance (ESG) ratings on corporate financial performance (CFP), with outcomes varying considerably. This study employs a dataset of publicly traded firms across 16 countries within the hospitality sector from 2005 to 2022 to examine the ESG-CFP relationship. Fixed effects regression results demonstrate a positive linkage between ESG ratings and CFP, utilizing both comprehensive ESG ratings and discrete pillar ratings. These findings remain robust across various performance measures including return on assets, return on equity, and Tobin’s Q. Heteroscedasticity and endogeneity concerns are mitigated through generalized least squares and two-stage least squares methods, respectively. Moreover, the positive impact of ESG on CFP exhibits greater potency in the United States relative to other countries and was more pronounced during the COVID-19 era. These findings offer valuable insights for business executives, investors, and policymakers in supporting ESG initiatives, guiding investment decisions, and formulating effective policy directives.

Suggested Citation

  • Kefan Lu & Cagri Berk Onuk & Yifei Xia & Jianing Zhang, 2025. "ESG Ratings and Financial Performance in the Global Hospitality Industry," JRFM, MDPI, vol. 18(1), pages 1-27, January.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:1:p:24-:d:1563402
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