ESG performance and firms’ business and geographical diversification: An empirical approach

Victor Barros, Pedro Verga Matos, Joaquim Miranda Sarmento and Pedro Rino Vieira

Journal of Business Research, 2024, vol. 172, issue C

Abstract: Diversification is primarily associated with improved performance, although the increasing complexity of conglomerates may offset these benefits. ESG scores and their dimensions serve as performance indicators and may also be risk components influencing cash flows. This study aims to investigate the relationship between ESG performance and firms’ diversification. We hand-collected data on business segments and geographical diversification from the constituents of the Euro Stoxx 50 over a large period, from 2002 to 2020. Our findings indicate that geographical diversification does not influence ESG variability. However, better ESG scores are observed in firms with more business segments, that do not have a dominant business segment with a significant role in the firm nor are concentrated in the most representative business segments. However, better ESG scores are also associated with greater asymmetry in the contribution of each business segment to the entire group. Collectively, we shed light on the importance of business diversification in improving sustainability performance across ESG dimensions.

Keywords: Diversification, ESG, sustainability; Herfindahl–Hirschman index; Entropy index (search for similar items in EconPapers)
JEL-codes: L20 L25 M14 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148296323007518
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:172:y:2024:i:c:s0148296323007518

DOI: 10.1016/j.jbusres.2023.114392

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().