Impact of ESG performance on firm value and profitability

Abstract

In this study, we examine impact of Environment, Social, Governance (ESG) performance on firm value and profitability. Our large dataset gives us the chance to better conceptualize this impact. Our findings suggest that overall ESG combined score is positively and significantly associated with firm value. Individual Social and Governance scores have a positive and significant relationship while Environment score does not have a significant relationship with firm value. On the other hand, ESG combined score, Environment, Social, and Governance scores have positive and significant relationships with firm profitability. These findings suggest that investing in high ESG performance promises financial return for the firm in terms of both value and profitability.

Keywords

• C33
• G32
• L25
• M14
• Q56