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Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis

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  • Nisar Ahmad
  • Asma Mobarek
  • Naheed Nawazesh Roni

Abstract

This study re-examines the impact of ESG (economic, environmental, social, and corporate governance performance) on the financial performance of UK firms. Most recent sample of 351 firms from FTSE350 for the time period 2002–2018 is used. The study estimates the impact of total ESG and individual dimensions of ESG on corporate financial performance using static and dynamic panel data techniques, and it also examines the impact of high and low ESG on firm financial performance. Further, the study investigates the role of firm size as a moderator in the relationship between ESG and firm financial performance. The results of total ESG performance indicate that ESG has a positive and significant impact on firm financial performance. However, in the case of the individual ESG performance, the results are mixed. Overall, the results confirm that high ESG firms show high financial performance as compared to low ESG firms. Results indicate that firm size moderates the relationship between ESG performance and firm financial performance.

Suggested Citation

  • Nisar Ahmad & Asma Mobarek & Naheed Nawazesh Roni, 2021. "Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1900500-190, January.
    • Handle: RePEc:taf:oabmxx:v:8:y:2021:i:1:p:1900500
    DOI: 10.1080/23311975.2021.1900500
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    1. Veeravel, V & Murugesan, Vijaya Prabhagar & Narayanamurthy, Vijayakumar, 2024. "Does ESG disclosure really influence the firm performance? Evidence from India," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 193-202.
    2. José Manuel Maside‐Sanfiz & Óscar Suárez Fernández & María‐Celia López‐Penabad & Mohammad Omar Alzghoul, 2024. "Does corporate social performance improve environmentally adjusted efficiency? Evidence from the energy sector," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1510-1530, May.
    3. Kerui Yu & Qun Wu & Xiaoqing Chen & Weizhong Wang & Abbas Mardani, 2024. "An integrated MCDM framework for evaluating the environmental, social, and governance (ESG) sustainable business performance," Annals of Operations Research, Springer, vol. 342(1), pages 987-1018, November.
    4. Carlo Drago & Loris Di Nallo & Maria Lucetta Russotto, 2023. "Social Sustainability in European Banks: A Machine Learning Approach using Interval- Based Composite Indicators," Working Papers 2023.13, Fondazione Eni Enrico Mattei.
    5. Rabi Narayan Kar & Amanpreet Kaur, 2023. "Do Disclosures Drive Socially Responsible Investing?," Paradigm, , vol. 27(1), pages 7-26, June.
    6. Agnese, Paolo & Cerciello, Massimiliano & Oriani, Raffaele & Taddeo, Simone, 2024. "ESG controversies and profitability in the European banking sector," Finance Research Letters, Elsevier, vol. 61(C).
    7. Ved Dilip Beloskar & S. V. D. Nageswara Rao, 2024. "Screening activity matters: Evidence from ESG portfolio performance from an emerging market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2593-2619, July.
    8. Cuesta-González, Ana & Cabeza-García, Laura & Fernández-Gago, Roberto, 2024. "CSR in Times of Crisis According to ESG Indicators in Europe: Analysis of the Impact of COVID-19," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    9. Remo-Diez, Nieves & Mendaña-Cuervo, Cristina & Arenas-Parra, Mar, 2023. "Exploring the asymmetric impact of sustainability reporting on financial performance in the utilities sector: A longitudinal comparative analysis," Utilities Policy, Elsevier, vol. 84(C).
    10. Sérgio Resende & Ariadna Monje‐Amor & Nuria Calvo, 2024. "Enterprise risk management and firm performance: The mediating role of corporate social responsibility in the European Union region," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2852-2864, July.
    11. OGUNSOLA E. Akintunde & DANIEL, Emmanuel Kayode, Ph.D. & Ass. Prof ORBUNDE Benshima, 2024. "Moderating Role of Board Independence on the Effect of Environmental and Governance Sustainability Disclosure on Firm Value of Listed Non-Financial Firms in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(4), pages 2700-2718, April.
    12. V. Veeravel & E. K. S. Sadharma & Bandi Kamaiah, 2024. "Do ESG disclosures lead to superior firm performance? A method of moments panel quantile regression approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 741-754, January.
    13. Huarng, Kun-Huang & Yu, Tiffany Hui-Kuang, 2024. "Causal complexity analysis of ESG performance," Journal of Business Research, Elsevier, vol. 170(C).
    14. Khurram, Muhammad Usman & Chen, Lifeng & Abedin, Mohammad Zoynul & Adu, Douglas A. & Lucey, Brian, 2024. "ESG disclosure and internal pay gap: Empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 228-244.
    15. Robinson, Ella & Parker, Christine & Carey, Rachel & Foerster, Anita & Blake, Miranda & Sievert, Katherine & Sacks, Gary, 2024. "Putting your money where your mouth is: Accelerating investment action for healthy and sustainable food systems in Australia," Food Policy, Elsevier, vol. 124(C).
    16. Ahmed Mohamed Habib & Nahia Mourad, 2024. "The Influence of Environmental, Social, and Governance (ESG) Practices on US Firms’ Performance: Evidence from the Coronavirus Crisis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2549-2570, March.
    17. Salma Zaiane & Dorra Ellouze, 2023. "Corporate social responsibility and firm financial performance: the moderating effects of size and industry sensitivity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1147-1187, December.
    18. Luky Patricia Widianingsih & Cliff Kohardinata & Emelie Vlaviorine, 2024. "Renewable Energy Consumption, ESG Reporting, and Fixed Asset Turnover: Does it Work in Asia?," International Journal of Energy Economics and Policy, Econjournals, vol. 14(1), pages 552-558, January.
    19. Ibrahim Khalifa Elmghaamez & Jacinta Nwachukwu & Collins G. Ntim, 2024. "ESG disclosure and financial performance of multinational enterprises: The moderating effect of board standing committees," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3593-3638, July.
    20. Ahmed Mohamed Habib, 2024. "Does real earnings management affect a firm's environmental, social, and governance (ESG), financial performance, and total value? A moderated mediation analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(11), pages 28239-28268, November.
    21. Nisar Ahmad & Moodhi Raid & Jumah Alzyadat & Hisham Alhawal, 2023. "Impact of urbanization and income inequality on life expectancy of male and female in South Asian countries: a moderating role of health expenditures," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-9, December.

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