Firm value, ownership structure, and strategic approaches to ESG activities

Hyun-Jung Nam (), Mehmet Bilgin and Doojin Ryu ()
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Hyun-Jung Nam: Pusan National University
Doojin Ryu: Sungkyunkwan University

Eurasian Business Review, 2024, vol. 14, issue 1, No 6, 187-226

Abstract: Abstract The strategic role of environmental, social, and governance (ESG) activities in firm performance has recently drawn increasing attention. In particular, the dynamics of ESG management in family-owned firms have become a crucial factor in increasing firm value. Using novel data from Korea, a suitable context for our analysis, we focus on the interplay between ESG investment and family ownership. Our results reveal that ESG activities can mitigate the agency problems inherent in family ownership, but their careful management is essential for maximizing firm value. We introduce the concept of the marginal effect of ESG, decompose its factors, and identify a critical threshold of family ownership that is instrumental for increasing firm value through ESG activities. Depending on a firm’s position relative to this threshold, we recommend strategies to increase or reduce ESG investment, showing that the timing of such investment or disinvestment in ESG activities emerges as a key strategic consideration. Our findings provide practical insights for family-owned firms to make informed decisions on ESG investment, thereby contributing not only to their own sustainability but also the long-term vitality of ESG activities.

Keywords: Environmental; social; and governance (ESG) investing; Family ownership; Firm value; Strategic development (search for similar items in EconPapers)
JEL-codes: G32 G34 L22 O16 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40821-024-00252-z

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