Search Results (42)

The relationship between environmental, social and governance (ESG) performance and corporate financial performance (CFP) remains an open question, particularly in capital-intensive sectors exposed to regulatory pressures and long-term transition costs. This study analyses the relationship between ESG ratings and financial performance using accounting data from 59 listed European energy companies over the period 2014–2023. ESG ratings were obtained from standardised sustainability scores available on Yahoo Finance and are therefore used as proxies for corporate sustainability performance. Financial data were extracted from Orbis Europe Full. The empirical design adopts an exploratory multi-method approach combining correlation analysis, multiple linear regression (OLS) and structural equation modelling (SEM). In the SEM model specification, ROE, ROA and ROCE are modelled as reflective indicators of a latent construct termed ‘economic performance’, whilst financial leverage is treated as a distinct observed variable representing firms’ financing structure. The results show that traditional linear models have limited explanatory power in explaining ESG ratings. The SEM analysis indicates that the latent construct of economic performance has a positive but statistically insignificant association with ESG ratings, whilst financial leverage shows a marginally significant positive association. Factor loadings confirm that ROE, ROA and ROCE consistently represent the common dimension of economic performance. Overall, the results suggest that ESG ratings in the European energy sector are explained not solely by short-term accounting profitability but also by broader strategic, organisational, governance, and financing conditions. The study contributes to research on the ESG-CFP relationship by proposing an exploratory structural equation modelling approach to modelling economic performance as a latent accounting construct. It offers food for thought for managers and policymakers evaluating sustainability strategies in capital-intensive transition contexts. Full article

Corporate social responsibility (CSR) is increasingly adopted as a strategic tool to enhance firms’ sustainability and financial performance (CFP). However, despite extensive research, evidence on the underlying factors influencing CSR and CFP remains scarce. This study addresses this gap by exploring the role of employee engagement as one possible mechanism through which CSR initiatives may translate into CFP. Adopting a systematic literature review on papers published in 2019–2024 and a comparative case study methodology, the paper analyzes two Italian firms characterized by different configurations of CSR practices, including varying degrees of formalization and integration into organizational culture. The study leverages semi-structured interviews with management, employee surveys capturing perceptions of CSR and engagement, and firm-level financial indicators. The findings suggest that CSR contributes to CFP through some dimensions of higher engagement and only when CSR is perceived by employees as authentic and embedded in everyday organizational practices. The paper contributes to the literature on the factors influencing the relationship between firms’ CSR activities and CFP and the role played by employee engagement. Moreover, it offers implications for managers to design CSR strategies that create both sustainable and financial value. Full article

Recent global events have slowed progress toward achieving the Sustainable Development Goals (SDGs), making robust sustainability reporting (SR) systems critical for monitoring and corrective actions. While research on the link between corporate sustainability performance (CSP) and corporate financial performance (CFP) is extensive, the specific role of sustainability reporting as a communication channel remains insufficiently explored. Therefore, the objective of this paper is to address this gap in the literature by assessing the relevance of sustainability reporting for modeling the relationship between CSP and CFP. In this study, a univariate meta-analysis based on a PRISMA screening framework was performed to assess the unidirectional relationship between SR and CFP, specifically investigating whether SR acts as a moderating or mediating factor in the CSP-CFP nexus. The analysis is limited to 19 high-quality articles published in top-tier accounting journals between 2014 and 2024 to minimize publication bias and ensure reliability. The meta-analysis reveals no statistically significant moderating effect of SR on CFP. Instead, the results confirm a significant mediating effect, particularly when considering the presence of sustainability reports rather than just their specific content. These findings suggest that SR serves as a vital catalyst for corporate communication, providing more positive effects in voluntary compared to mandatory disclosure settings. This paper has both theoretical and practical implications, which are mainly relevant to standard-setters for assessing the efforts of SR disclosure regulation, and is of fundamental importance to managers as it indicates that SR does not relate solely to the practice of conformity, but rather to essential channels of communication and value creation. Full article

This research examines the influence of environmental, social, and governance (ESG) strategies on corporate financial performance (CFP) in China’s automotive industry, characterized by intense regulatory pressure and fast-paced technological transformation. Using an unbalanced panel dataset of A-share listed automotive firms from 2009 to 2024, this paper combines ESG scores from the Huazheng ESG index with firm-level financial data from CSMAR. CFP is measured through both accounting-based (ROA) and market-based (Tobin’s Q) indicators. Panel regression models are applied to evaluate the influence of overall ESG performance and the three individual pillars, and to assess heterogeneity across ownership types, firm type, and firm age. The results show that ESG performance is significantly and positively associated with ROA, but is insignificantly associated with Tobin’s Q. It is suggested that ESG engagement improves accounting profitability but is not fully reflected in the capital market. Among the three ESG pillars, governance shows the strongest positive link with ROA, while environmental and social performance are weakly associated with ROA. Furthermore, the heterogeneity study shows that the positive relationship between ESG and CFP is more pronounced for non-state-owned firms, vehicle manufacturers, or mature firms. Overall, this paper presents fresh evidence on whether and how ESG initiatives can facilitate sustainable value in China’s automotive sector, offering insights for policymakers and management that may help this industry achieve sustainable growth. Full article

As the urgency to address climate change intensifies, understanding the financial implications of corporate greenhouse gas (GHG) emission reduction has become critical. This study examines the relationship between emission reductions and corporate financial performance (CFP) in 468 companies across advanced and emerging market economies (EMEs) from 2010 to 2022. Using a standardized emissions score to mitigate inconsistencies in greenhouse gas (GHG) reporting, we analyze how sectoral and regional dynamics influence financial outcomes using a panel fixed-effects model. The results are mixed: emission reductions are positively associated with CFP in advanced economies and low-emitting sectors. However, companies in high-emitting industries experience a negative relationship between emission reductions and CFP. The findings underscore the need for policies and corporate strategies calibrated by sector and country development status, as the emissions–profitability relationship varies across contexts. Full article

During the past two decades, researchers and professionals have increasingly explored the financial and macroeconomic implications of sustainable business practices, particularly through the lens of environmental, social, and governance (ESG) metrics. This review synthesizes evidence from financial economics and sectoral labor analysis to assess the impact of ESG performance and green employment on corporate financial performance (CFP) and broader economic growth. Using a discounted cash-flow framework and sectoral panel data from European economies (2008–2023), the findings reveal that robust ESG practices improve operating profits, reduce financial risk and support higher dividend distributions, while green jobs contribute significantly to Gross Value Added (GVA) and Gross Domestic Product (GDP), with each additional green job adding approximately EUR 101.920 to GVA and EUR 135.000 to GDP, in annual terms. Sectoral impacts are especially pronounced in construction, energy, and financial services, with annual contributions ranging from EUR 10.4 to EUR 11.1 million in GVA and EUR 13.7 to EUR 14.8 million in GDP. These results underscore the dual role of ESG as a financial indicator and strategic sustainability tool, advancing key United Nations Sustainable Development Goals (SDGs), including SDG 8 (Decent Work and Economic Growth), SDG 12 (Responsible Consumption and Production), SDG 13 (Climate Action), and SDG 17 (Partnerships for the Goals). The integration of green employment metrics into national productivity frameworks and corporate ESG strategies offers practical guidance to policymakers, investors, and cross-sector partners committed to sustainable development. Full article

This study investigates the bidirectional relationship between biodiversity conservation, an increasingly important dimension of corporate social responsibility (CSR), and corporate financial performance (CFP). Specifically, it compares the manufacturing sector, which has substantial environmental impact and close ties to ecosystems, and the nonmanufacturing sector. The analysis draws on 1079 firm-year observations of Japanese companies from 2017 to 2022, employing the ratio of biodiversity-related expenditures to total environmental costs as the independent variable. CFP is measured by return on assets (ROA) and the price-to-book ratio (PBR). The results show that the effects on ROA significantly differ between manufacturing and nonmanufacturing sectors, with more positive impacts in manufacturing. In contrast, no clear sectoral differences are identified for the PBR. The reverse analysis suggests that, in the nonmanufacturing sector, firms with a higher PBR tend to allocate less to biodiversity conservation, whereas in manufacturing firms, both ROA and the PBR indicate positive effects, although statistical significance was not established. These findings indicate that biodiversity conservation in the manufacturing sector can be regarded as a strategic investment that contributes to profitability, and that its effects differ across industries. The study further suggests that investors and policymakers should consider industry-specific characteristics when evaluating corporate initiatives and designing institutional frameworks. Full article

This article explores the relationship between corporate financial performance (CFP) and commitment to ESG (environmental, social and governance) practices, using a sample of companies listed on the S&P 500 and TSX 60 indices. By employing a linear regression model, the study examines how financial indicators such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), return on assets (ROA), Assets and Debt influence ESG scores. The results show that financial indicators such as EBITDA, ROA and Assets are positively associated with increased ability to commit resources to ESG practices, except in some cases like when costs associated with ESG initiatives can reduce the competitiveness and profitability of companies in the short term, where ROA is negatively correlated with the adoption of ESG criteria. Also, with regard to the size of companies, thanks to their greater resources, larger companies are more inclined to adopt ESG criteria. These findings enhance the understanding of financial conditions that enable or constrain ESG adoption and provide managerial insights for strategic resource allocation in the pursuit of sustainability goals. Full article

The pharmaceutical industry has been developing rapidly in recent years, and concerns have been widely raised about social responsibility for the safety of people’s lives. This research aims to investigate the impact of CSR on CFP of listed pharmaceutical companies in China. This study was based on the data of pharmaceutical listed companies from 2010 to 2020 as a sample and built regression models for the effects of pharmaceutical corporate social responsibility (CSR) on corporate financial performance (CFP) based on the indirect effects of technological innovation and media coverage. The two-way fixed effect method, the systematic generalized method of moments estimation (SYS-GMM), and the Bootstrap method are adopted for the regression analysis of the model. The research found that (1) CSR positively affected CFP; (2) CSR positively affected technological innovation, while technological innovation partially mediated between CSR and CFP; and (3) both positive and negative media coverage negatively moderated the relationship between CSR and CFP as well as the relationship between CSR and technological innovation. In addition, both positive and negative media coverage negatively moderates the mediation path of “CSR–corporate innovation–CFP”. Full article

This study proposes that MNCs might withdraw from the CSR concept to gain tangible benefits, like improved corporate financial performance (CFP), and intangible benefits, such as reputational capital (RC). This represents a paradigm shift from the philanthropic end of the spectrum to the strategic win–win side, where all investments are expected to yield a return. Being tacit, quests for reputational returns are discussed in terms of corporate social performance (CSP) with its currency being RC (an intangible asset). However, this requires a deep understanding of the CSP concept and ‘good management’. This study argues that CSR will change trajectory based on three facets. First, we argue for the replacement of CSR by CSP, where ESG becomes ‘business as usual’. Second, regulatory categories (voluntary or legislated) will merge. Third, ethics endorsing ‘good management’ will alter executive mindsets, making CSP deeply embedded in corporate behavior. Organizational behavior towards CSP must, therefore, be sincere yet not embedded overwhelmingly. We extend previous discussions regarding the relationship between CSP and CFP, who present robust evidence that (1) absent CSR embedment has no/neutral CSP and CFP effect; (2) inadequate CSR yields negative CSP and CFP; and (3) productive CSR positively affects CSP and CFP. Consequently, this study argues that (4) strategic CSR (SCSR) maximizes positive CSP and that (5) excessive CSR is detrimental, yielding negative effects on both CSP and CFP. This study, therefore, conjectures the existence of a ‘sweet spot’, where SCSR optimizes CSP and CFP outcomes. The contributions address ESG engagement as a ‘sweet spot’ concept and provide a model enabling SCSR discussion, CSP evaluations, and an implementation framework for its achievement. The framework gives executives a toolbox to influence their stakeholders toward improved CFP. Therefore, our perspective supports CSP embedment, enabling firms to address business growth and sustainability requirements. Full article

Existing research critically examines the influence of environmental, social, and governance (ESG) ratings on corporate financial performance (CFP), with outcomes varying considerably. This study employs a dataset of publicly traded firms across 16 countries within the hospitality sector from 2005 to 2022 to examine the ESG-CFP relationship. Fixed effects regression results demonstrate a positive linkage between ESG ratings and CFP, utilizing both comprehensive ESG ratings and discrete pillar ratings. These findings remain robust across various performance measures including return on assets, return on equity, and Tobin’s Q. Heteroscedasticity and endogeneity concerns are mitigated through generalized least squares and two-stage least squares methods, respectively. Moreover, the positive impact of ESG on CFP exhibits greater potency in the United States relative to other countries and was more pronounced during the COVID-19 era. These findings offer valuable insights for business executives, investors, and policymakers in supporting ESG initiatives, guiding investment decisions, and formulating effective policy directives. Full article

The literature has reached a consensus that ISO standardization enhances the Environmental, Social, and Governance (ESG) performance of companies, which in turn has a positive effect on corporate financial performance (CFP). There is less understanding in terms of the effect of different certifications and underlying mechanisms between the effect of the ISO certification on the CFP. The purpose of this paper is to investigate the impact of different ISO certifications on the CFP of Turkish companies listed on the Istanbul Stock Exchange (BIST). Based on audited financial statements of a population of 148 manufacturing companies listed during 2010–2022 and using the generalized method of moments (GMM) technique, this study shows that the number of ISO certifications has a positive impact on return on asset (ROA) and Tobin’s Q, however, no direct effect on operational efficient and R&D intensity. While there is no effect of the occupational health and safety management systems certification on ROA and Tobin’s Q, the analysis brought forward that ROA seems to be positively affected by the standards referring to environmental, energy, quality, and information security management systems certification while Tobin’s Q is positively affected by the last two certifications. Full article

Corporate Social Responsibility (CSR) was usually referred to as a concept where companies initiate voluntary action towards social and environmental concerns in the context of business operations related to the stakeholders of the company prior to the CSR Act 2013 in India. Post-2013, the voluntary initiative was replaced by regulatory guidelines to address social and environmental concerns. The CSR applicability–investment gap was used as a base concept in this study with instrumental theory; the study offers a strategic perspective of CSR and how organizations emphasized maximizing stakeholders’ value. In order to further investigate the effect of CSR on corporate financial performance (CFP) through the measure of shareholders’ value, i.e., the return on equity (ROE), the study used the sample from the National Stock Exchange (NSE)-Nifty-100 indexed companies of Emerging Economy—India for a span of fourteen years (2009–2023). The vast majority of research in this domain is conducted in developed countries; the research gap is filled by this study by considering India and drawing samples from multiple industries. The empirical model was developed by using panel data regression, where the dependent variable was ROE, and the independent variables were earning per share (EPS), log total income (LTI), CSR applicability/profit after tax (CRSAPPPAT), and CSR investment/profit after tax (CSRIPAT). The findings also highlighted the CSR applicability and investment of the firms during pre- and post-Sustainable Development Goal (SDG) periods. The same was also analyzed for the firms committed to CSR and not committed to CSR. The results indicated that there is no significant impact of the CSR/ESG initiatives (applicability and investment) on the ROE of the firms. The performance could be better if the companies minimize the CSR/ESG promise–performance gap through effective communication with stakeholders. Full article

This paper analyzes the effects of Environmental, Social, and Governance (ESG) performance on corporate financial performance (CFP), enriching the research on the intrinsic mechanism between ESG and financial performance in developing countries. This study uses a data sample of A-share listed companies in Shanghai and Shenzhen, China from 2009 to 2021, and adopts a two-way fixed effects model research methodology with fixed time and industries to explore the relationship and intrinsic mechanism between the two in conjunction with relevant basic theories. The study findings indicate that ESG performance exerts a positive influence on CFP by fostering corporate innovation. Corporations with good ESG performance in the long term may be more conducive to good CFP. When corporations face financial constraints, the role of ESG performance in enhancing CFP weakens. Heterogeneity analyses indicate that ESG performance contributes more to the CFP of non-state-owned enterprises (non-SOEs). The negative moderating influence of financial constraints is more pronounced in non-SOEs. Additionally, ESG performance promotes the improvement of CFP in non-heavy polluting corporates. This research study extends a scientific foundation for how corporates can improve CFP and increase market competitiveness. Full article

Along with the constant changes in the current business environment, more and more enterprises have recognised the importance of Corporate Social Responsibility (CSR). Considering that profit maximisation is the eternal pursuit of enterprises and that some studies have already linked the financial performance of enterprises and their implementation of social responsibility together, this study will try to further explore the impact of social responsibility initiatives on enterprises’ financial performance within the context of emerging economy. Given that enterprises’ sustainable development is closely related to their implementation of CSR, an improvement in their corresponding financial performance due to effective social responsibility practices can incentivise enterprises to take part in CSR initiatives aimed at enhancing the sustainable development of society and the environment. Through using the panel data from Chinese Listed Companies, this research finds that responsibility’s implementation is positively related with enterprises’ financial performance, and that relationship is non-linear. Additionally, as a critical regulatory institution, government fails to function as a mediator within the above-mentioned relationship based on the robust empirical test. At the same time, the fulfilment of CSR can not be achieved at the expense of profit maximisation. The non-linear relationship between CSR and enterprises’ financial performance (CFP) demonstrated in this research suggests that the financial performance of a firm can be optimised when it moderately fulfils its social responsibility. This finding offers a potential optimal strategy for the sustainable development of the firm as well as society. Also, the role of government deserves further exploration and utilisation, considering its significant linkages with enterprises and social development. Full article