This study aims to provide insights into the interplay between environmental, social, and governance (ESG) scores and financial outcomes by investigating whether it leads to enhanced financial performance and firm value, partly during the economic crisis constituted by the Global Financial Crisis (GFC) and COVID-19 pandemic. The study uses the theoretical frameworks stakeholder theory, resource-based view (RBV) theory, as well as customer and investor preference theory as an explanatory model for the results conducted by the panel data regression on a dataset of 248 companies derived from the Standard & Poor’s (S&P) 500 index from 2006 to 2023. The study found that ESG performance significantly enhances both return on capital employed (ROCE) and Tobin's Q. A one-unit increase in ESG score leads to a 0.59860 percentage increase in ROCE and a 0.5329 percentage increase in Tobin's Q. It can be established that larger companies exhibit lower financial performance and market valuations, while companies in the lowest ESG score quartile benefit more from ESG improvements. The impact of ESG scores on firm value is more pronounced during the Global Financial Crisis and the COVID-19 pandemic. The empirical findings from this study provide robust evidence supporting the theoretical framework and the growing body of literature suggesting a positive relationship between ESG performance and corporate financial outcomes. The findings offer valuable insights for business leaders, policymakers, and investors on the strategic importance of sustainability initiatives in today's complex business environment.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hj-64590 |
| Date | January 2024 |
| Creators | Jönsson, Jacob, Hajra, Endrit |
| Publisher | Jönköping University, IHH, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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