Assessing the convergence process of ESG metrics: a research note on the role of economic freedom

Patroklos Patsoulis () and Demetra Demetriou ()
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Patroklos Patsoulis: Neapolis University Pafos
Demetra Demetriou: Neapolis University Pafos

Letters in Spatial and Resource Sciences, 2024, vol. 17, issue 1, No 18, 15 pages

Abstract: Abstract Do environmental, social, and corporate governance (ESG) metrics convergence at the country level? Is there a common mechanism influencing the key attributes of this transitional process? This paper delves into the convergence patterns of firm-specific ESG factors, aggregated at a country level, aiming to identify the drivers of convergence. Specifically, we investigate whether ESG metrics have reached a singular or multiple steady states. To address this critical issue, we employ the Phillips and Sul (Econometrica 75(6):1771–1855, 2007; J Appl Econom 24(7):1153–1185, 2009) (hereafter PS) methodology. The findings reject the hypothesis of full convergence and suggest the formation of four distinct clubs. To further scrutinize our results, we conduct statistical tests to determine whether previously identified transition paths (specifically, factors related to economic freedom) corroborate our story.

Keywords: Global entrepreneurship; Creative destruction; ESG; Environmental disasters (search for similar items in EconPapers)
JEL-codes: C23 F64 Q56 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s12076-024-00383-x

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