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Business Valuation And Esg Factors – An Integrated Approach

Author

Listed:
  • Andreea IURAȘ

    (University of Oradea, Accounting, Audit, and Business Administration, Faculty of Economic Sciences, Oradea, Romania)

  • Dorina-Nicoleta POPA

    (University of Oradea, Finance and Accounting Department, Faculty of Economic Sciences, Oradea, Romania)

  • Natalia Ioana FOLTEAN

    (West University of Timișoara, Doctoral School of Faculty of Economics and Business Administration, Timișoara, Romania)

Abstract

Considering the rising popularity of reporting ESG (environment, social, governance) related actions, a natural curiosity was born among investors, and other parties, whether it can affect the business value or not. The answers regarding the integration of ESG factors into business valuation are still contradictory, with the tendency towards those who positively support this statement. This study aims to observe some of the potential correlations between ESG factors reported and business valuation. To understand the connectivity, we reviewed key works from the literature regarding this topic and looked for the optimal approach for integrating ESG factors into the business valuation. In this regard, an empirical study case on Romanian companies was developed. The investigated period was from 2020 to 2022. The purpose of the study was to identify the correlations between the most used profitability indicators, price multiples, EV/EBITDA, and ESG Scores. Results showed that the company with the highest ESG score had better profitability, and was the best performing on the market. However, because ESG reporting is still a new challenge for Romanian companies, and measuring the ESG score is still in its infancy stage, we proposed that domestic companies should prepare better to report and disclose sustainability data and regulators should support the companies by developing and promoting sustainability and ESG reporting and disclosure principles, ethics and guides

Suggested Citation

  • Andreea IURAȘ & Dorina-Nicoleta POPA & Natalia Ioana FOLTEAN, 2023. "Business Valuation And Esg Factors – An Integrated Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 32(1), pages 378-390, July.
    • Handle: RePEc:ora:journl:v:32:y:2023:i:1:p:378-390
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    References listed on IDEAS

    as
    1. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ESG; business valuation; integration; discounted cashflow;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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