Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe
Abstract
:1. Introduction
2. Literature Review
2.1. Theoretical Framework
2.2. Prior Research Discussion on the Relationship between Corporate Responsibility (CSR, CSP and ESG) and Performance
3. Hypotheses
4. Methods
4.1. Sample Collection
4.2. Variable Measurements
4.3. Models: Regression Analysis and ESG-Based Structural Equation Pattern to Test the Hypotheses
- MLR (Multiple Linear Regression) for the sample of European corporations (450 firm-year observations for the ‘post-crisis’ period 2014–2017), including the above-mentioned dummy and control variables (fixed-effects panel data model, after executing preliminary Breusch-Pagan, Lagrange-multiplier and Hausman tests to control for pooled and/or random effects);
- SEM (Structural Equations Model) performed by Partial Least Squares Path Modeling on the specific ESG sub-sample (analysed with regard to the 2016–2017 period due to the new regulatory framework set out at a European scale and the spread of ESG metrics, which would entail enhanced firm performance and evaluations [88]), in order to implement the analysed sub-variables with suitable vector clusters (latent variables: CS, ESG, and FMP, extracted from statistical projections and grouped by OLS). It is worth underlining that the SEM-PLS is a procedure increasingly being adopted in business and social sciences [89,90].
4.4. Results
5. Discussion of Findings and Conclusions
Author Contributions
Funding
Conflicts of Interest
References
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Variable | Mean | Median | Min | Max | Std.Dev. | Var. Coeff. |
---|---|---|---|---|---|---|
EMPL: employees | 10.353 | 87,114 | 40 | 625,796 | 108.253 | 1.045 |
ln_EMPL | 10.738 | 11.375 | 3.689 | 13.3468 | 1.804 | 0.168 |
SALES | 3.12e+007 | 2.04e+007 | 255,203 | 2.17e+008 | 3.58e+007 | 1.147 |
ln_SALES | 16.636 | 16.836 | 12.450 | 19.197 | 1.259 | 0.076 |
INV_CAP: Invested Capital | 1.85e+008 | 4.48e+007 | 1.37e+006 | 2.08e+009 | 3.64e+008 | 1.968 |
ln_INV_CAP | 17.842 | 17.618 | 14.134 | 21.455 | 1.521 | 0.085 |
FIN LEV.: leverage | 5.624 | 2.302 | 0.003 | 61.947 | 8.039 | 1.429 |
ROS: Return on Sales | 0.163 | 0.127 | −1.255 | 0.697 | 0.164 | 1.003 |
ROI: Return on Investment | 0.056 | 0.055 | −0.011 | 0.218 | 0.044 | 0.771 |
ROA: Return on Asset | 0.040 | 0.033 | −0.133 | 0.369 | 0.051 | 1.275 |
ROE: Return on Equity | 0.083 | 0.098 | −6.566 | 0.517 | 0.420 | 5.034 |
CFOI: Cash flow to Inv. | 0.064 | 0.063 | −0.192 | 0.370 | 0.057 | 0.887 |
P/BV: Price on Book Value | 2.707 | 2.094 | 0.350 | 14.705 | 2.214 | 0.818 |
Analyst stock recomm | 2.441 | 2.400 | 1.700 | 3.700 | 0.393 | 0.161 |
E: Environment (score) | 73.292 | 74.300 | 34.800 | 96.000 | 12.137 | 0.166 |
S: Social (score) | 72.164 | 74.000 | 43.100 | 97.200 | 10.903 | 0.151 |
G: Governance (score) | 69.247 | 70.000 | 36.900 | 88.000 | 10.090 | 0.146 |
C: Controversies (score) | 2.536 | 3.000 | 1.000 | 5.000 | 0.842 | 0.332 |
ESG _Tot (score) | 71.341 | 72.000 | 43.000 | 87.000 | 9.441 | 0.132 |
dE: E score over industry | 1.232 | 1.217 | 0.642 | 1.738 | 0.226 | 0.183 |
dS: S score over industry | 1.196 | 1.193 | 0.804 | 1.664 | 0.166 | 0.139 |
dG: G score over industry | 1.109 | 1.116 | 0.625 | 1.488 | 0.156 | 0.141 |
dC: C score over industry | 1.367 | 1.429 | 0.400 | 2.500 | 0.425 | 0.309 |
ln_Emp | ln_Sal | ln_Inv. | Lev | ROI | ROA | ROE | CFOI | E | S | G | C | dE | dS | dG | dC | Recomm. | P/BV | ESG_T. | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ln_Emp. | 1 | 0.723 ** | 0.444 ** | 0.036 | −0.111 | −0.123 * | −0.017 | −0.118 | 0.26 ** | 0.110 | 0.215 ** | 0.402 ** | 0.280 ** | 0.180 ** | 0.287 ** | 0.288 ** | −0.507 ** | −0.087 | 0.235 ** |
ln_Sal | 1 | 0.519 ** | −0.046 | −0.175 ** | −0.255 ** | −0.083 | −0.080 | 0.157 ** | 0.092 | 0.223 ** | 0.425 ** | 0.185 ** | 0.102 | 0.186 ** | 0.289 ** | −0.494 ** | −0.262 ** | 0.186 ** | |
ln_Inv | 1 | 0.543 ** | −0.667 ** | −0.409 ** | −0.099 | −0.562 ** | 0.228 ** | 0.191 ** | 0.035 | 0.579 ** | 0.412 ** | −0.031 | 0.257 ** | 0.366 ** | −0.186 ** | −0.571 ** | 0.182 ** | ||
Lev | 1 | −0.516 ** | −0.310 ** | −0.326 ** | −0.414 ** | 0.136 * | 0.145 * | −0.119 | 0.238 ** | 0.340 ** | 0.005 | 0.113 | 0.131 * | 0.086 | −0.100 | 0.069 | |||
ROI | 1 | 0.562 ** | 0.169 ** | 0.759 ** | 0.005 | −0.169 ** | 0.058 | −0.331 ** | −0.178 ** | 0.041 | −0.098 | −0.091 | −0.014 | 0.658 ** | −0.041 | ||||
ROA | 1 | 0.330 ** | 0.398 ** | 0.003 | −0.111 | 0.030 | −0.149 * | −0.078 | −0.002 | −0.046 | −0.032 | 0.115 | 0.377 ** | −0.034 | |||||
ROE | 1 | 0.094 | 0.015 | −0.097 | −0.008 | −0.014 | 0.006 | −0.012 | 0.031 | 0.015 | 0.108 | 0.097 | −0.034 | ||||||
CFOI | 1 | −0.059 | −0.128 * | 0.101 | −0.257 ** | −0.197 ** | 0.043 | −0.125 * | −0.055 | 0.014 | 0.534 ** | −0.037 | |||||||
E | 1 | 0.553 ** | 0.591 ** | −0.179 ** | 0.868 ** | 0.466 ** | 0.628 ** | −0.185 ** | −0.161 ** | −0.027 | 0.860 ** | ||||||||
S | 1 | 0.563 ** | −0.243 ** | 0.562 ** | 0.777 ** | 0.521 ** | −0.241 ** | −0.049 | −0.153 * | 0.839 ** | |||||||||
G | 1 | −0.237 ** | 0.482 ** | 0.499 ** | 0.856 ** | −0.151 * | −0.313 ** | −0.034 | 0.827 ** | ||||||||||
C | 1 | −0.030 | −0.119 | −0.104 | 0.818** | −0.232 ** | −0.287 ** | −0.275 ** | |||||||||||
dE | 1 | 0.498 ** | 0.625 ** | −0.079 | −0.072 | −0.091 | 0.768 ** | ||||||||||||
dS | 1 | 0.512 ** | −0.129 * | −0.109 | 0.055 | 0.691 ** | |||||||||||||
dG | 1 | −0.129 * | −0.260 ** | −0.085 | 0.774 ** | ||||||||||||||
dC | 1 | −0.200 ** | −0.069 | −0.244 ** | |||||||||||||||
Recom. | 1 | −0.004 | −0.201 ** | ||||||||||||||||
P/BV | 1 | −0.080 | |||||||||||||||||
ESG_Tot | 1 |
Coefficient | Std Error | T | p-Value | ||
---|---|---|---|---|---|
Const | 14.9869 | 2.0082 | 7.4628 | <0.00001 | *** |
ln_EMPLOYEES | 0.2876 | 0.0695 | 4.1356 | 0.00004 | *** |
ln_SALES | 0.2841 | 0.1344 | 2.1139 | 0.03508 | ** |
ln_INVESTMENTS | −1.2544 | 0.1149 | −10.9180 | <0.00001 | *** |
LEVERAGE | 0.1298 | 0.0253 | 5.1240 | <0.00001 | *** |
DESG | 1.5565 | 0.3471 | 4.4844 | <0.00001 | *** |
Regression Statistics | |||||
Sum Squared Errors | 3395.202 | S.E. | 2.765 | Sum Squared Errors | |
R-squared | 0.2257 | Adj. R-squared | 0.217 | R-squared | |
F-test | 37.991 | p-value(F) | 0.000 | F-test |
Coefficient | Std Error | T | p-Value | ||
---|---|---|---|---|---|
Const | 17.6004 | 2.8577 | 6.1589 | <0.0000 | *** |
ln_EMPLOYEES | 0.1738 | 0.0603 | 2.8804 | 0.0051 | *** |
ln_SALES | 0.1523 | 0.1231 | 1.2371 | 0.2196 | |
ln_INVESTMENTS | −1.1577 | 0.1594 | −7.2630 | <0.0000 | *** |
LEVERAGE | 0.0804 | 0.0164 | 4.8945 | <0.0000 | *** |
ESG_Tot | −0.0460 | 0.0348 | −1.3230 | 0.1895 | |
dE | 2.1672 | 1.1564 | 1.8741 | 0.0645 | * |
dS | −0.2671 | 0.8738 | 0.3057 | 0.7606 | |
dG | 0.8368 | 1.0903 | 0.7671 | 0.4452 | |
Regression Statistics | |||||
Sum Squared Errors | 129.9269 | S.E. | 1.2588 | Sum Squared Errors | |
R-squared | 0.5120 | Adj. R-squared | 0.4644 | R-squared | |
F-test | 10.9266 | p-value(F) | 0.0000 | F-test |
y = ROI | y = ROA | y = ROE | |||||||
---|---|---|---|---|---|---|---|---|---|
Coeffic. | p-Value | Coeffic. | p-Value | Coeffic. | p-Value | ||||
Const | 0.3888 | <0.0000 | *** | 0.4528 | 0.0004 | *** | 0.3654 | 0.5316 | |
ln_EMPLOYEES | 0.0052 | 0.0452 | ** | 0.0068 | 0.0423 | ** | 0.02876 | 0.2988 | |
ln_SALES | 0.0033 | 0.4202 | −0.0168 | 0.0306 | ** | −0.2176 | 0.0888 | * | |
ln_INVESTMENTS | −0.0248 | <0.0000 | *** | −0.0110 | 0.0062 | *** | 0.1856 | 0.1519 | |
LEVERAGE | −0.0010 | 0.0351 | ** | −0.0019 | 0.0122 | ** | −0.0721 | 0.0620 | * |
ESG_Tot | −0.0002 | 0.7911 | −0.0017 | 0.0771 | * | −0.0285 | 0.0411 | ** | |
dE | 0.0518 | 0.0936 | * | 0.0923 | 0.0154 | ** | 1.039 | 0.0273 | ** |
dS | −0.0360 | 0.0972 | * | −0.0598 | 0.0899 | * | 0.1070 | 0.7798 | |
dG | 0.0019 | 0.9497 | 0.0706 | 0.0970 | * | 0.6152 | 0.0999 | * | |
Regression Statistics | |||||||||
R-squared | 0.5757 | 0.3744 | 0.5103 | ||||||
S.E. | 0.0303 | 0.0418 | 0.5198 | ||||||
Adj. R-squared | 0.5343 | 0.3134 | 0.4625 | ||||||
p-value(F) | 0.000 | 0.0000 | 0.0938 |
© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Taliento, M.; Favino, C.; Netti, A. Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe. Sustainability 2019, 11, 1738. https://doi.org/10.3390/su11061738
Taliento M, Favino C, Netti A. Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe. Sustainability. 2019; 11(6):1738. https://doi.org/10.3390/su11061738
Chicago/Turabian StyleTaliento, Marco, Christian Favino, and Antonio Netti. 2019. "Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe" Sustainability 11, no. 6: 1738. https://doi.org/10.3390/su11061738
APA StyleTaliento, M., Favino, C., & Netti, A. (2019). Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe. Sustainability, 11(6), 1738. https://doi.org/10.3390/su11061738