Analysis of the Impact of Environmental, Social and Governance Factors on the Performance of Firms

Abstract

The research conducted on the influence of specific and ESG factors on the financial performance of companies in the technological sector, based on a sample of 50 American companies listed on the NYSE and NASDAQ stock exchanges over a 10-year period (2011-2021), reveals an inverse relationship between ESG score and financial performance. The study utilized multiple regression models with fixed effects and random effects, both linear and non-linear, with panel data. The findings indicate that the implementation of ESG policies at the company level leads to an increase in marginal cost, resulting in a decrease in financial performance. This observation provides an explanation for the negative association observed between ESG ratings and financial performance in the technological sector. The results of this study suggest that while non-financial performance, represented by ESG factors, is gaining importance as a global trend and influencing investment decisions for many investors, it does not necessarily translate into improved financial performance for companies in the technological sector. The implementation of ESG policies appears to have a negative impact on the financial indicators measured, namely ROA, ROE, and Tobin's Q-rate. It is worth noting that these findings are specific to the sample of American technological companies analyzed in the study and may not be generalizable to companies in other sectors or regions. Additionally, as with any empirical research, there may be limitations to consider, such as the chosen time frame, the selection of variables, and potential unobserved factors that could influence the results.

Keywords

• esg score
• panel data
• financial performance
• technology sector
• non-linear regression