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Environmental, social and governance initiatives and wealth creation for firms: An empirical examination

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  • Rajesh Kumar Bhaskaran
  • Irene Wei Kiong Ting
  • Sujit K. Sukumaran
  • Saraswathy Divakaran Sumod

Abstract

This study examines the effect of environmental, social, and governance (ESG) activities on firm performance of 4,887 global companies. Mean difference test shows that firms with a high level of ESG activities are different from their low‐ESG counterparts. The two‐stage least square results suggest that ESG activities on (a) the welfare for internal stakeholders and best corporate governance practices are beneficial for firm performance and (b) antitakeover mechanisms (pollution control) adopted by firms are negatively (positively) valued by market players. Overall, this is the first study to examine the effects of ESG on the market‐based and accounting‐based performance of global firms.

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  • Rajesh Kumar Bhaskaran & Irene Wei Kiong Ting & Sujit K. Sukumaran & Saraswathy Divakaran Sumod, 2020. "Environmental, social and governance initiatives and wealth creation for firms: An empirical examination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 710-729, July.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:5:p:710-729
    DOI: 10.1002/mde.3131
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    2. Ali Uyar & Simone Pizzi & Fabio Caputo & Cemil Kuzey & Abdullah S. Karaman, 2022. "Do shareholders reward or punish risky firms due to CSR reporting and assurance?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1596-1620, July.
    3. Yuan, Mingqing, 2024. "Beyond green bonds: Stock market reactions to ESG bond announcements and issuances in Japan," MPRA Paper 120943, University Library of Munich, Germany.
    4. Viktor P. Ivanitsk & Larisa D. Petrenko, 2020. "Development of responsible investment within the concept of sustainable finance," Journal of New Economy, Ural State University of Economics, vol. 21(4), pages 63-78, December.
    5. Eleonora Santos & Inês Lisboa, 2022. "The Effects of Subsidies on MSW Treatment Companies: Financial Performance and Policy Implications," Sustainability, MDPI, vol. 14(5), pages 1-22, March.
    6. Pankaj C. Patel & Marcus T. Wolfe & Maria João Guedes, 2023. "The triple‐edged sword of sensitivity of sales, cash flows, and debt to investments: Venture survival and capital investments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 473-489, January.
    7. Jin Zhu & Fei Huang, 2023. "Transformational Leadership, Organizational Innovation, and ESG Performance: Evidence from SMEs in China," Sustainability, MDPI, vol. 15(7), pages 1-23, March.
    8. Shaista Wasiuzzaman & Ali Uyar & Cemil Kuzey & Abdullah S. Karaman, 2022. "Corporate social responsibility: Is it a matter of slack financial resources or strategy or both?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2444-2466, September.
    9. Anrafel de Souza Barbosa & Maria Cristina Crispim & Luiz Bueno da Silva & Jonhatan Magno Norte da Silva & Aglaucibelly Maciel Barbosa & Sandra Naomi Morioka, 2024. "How can organizations measure the integration of environmental, social, and governance (ESG) criteria? Validation of an instrument using item response theory to capture workers' perception," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3607-3634, May.
    10. Xiaodan Wu & Richard Amoasi, 2024. "The role of CSR in sustaining corporate brands in the global market: The perspective of telecommunication companies in Ghana," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 433-447, January.

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