Do environmental, social, and governance activities improve corporate financial performance?

Jun Xie, Wataru Nozawa, Michiyuki Yagi, Hidemichi Fujii and Shunsuke Managi

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigated the relationship between corporate efficiency and corporate sustainability to determine whether firms concerned about environmental, social and governance (ESG) issues can also be efficient and profitable. We applied data envelopment analysis to estimate corporate efficiency and investigated the nonlinear relationship between corporate efficiency and ESG disclosure. Evidence shows that corporate transparency regarding ESG information has a positive association with corporate efficiency at the moderate disclosure level, rather than at the high or low disclosure level. Governance information disclosure has the strongest positive linkage with corporate efficiency, followed by social and environmental information disclosure. Moreover, we explored the relationship between particular ESG activities and corporate financial performance (CFP), including corporate efficiency, return on assets and market value. We found that most of the ESG activities reveal a non-negative relationship with CFP. These findings may provide evidence about voluntary corporate social responsibility (CSR) strategy choices for enhancing corporate sustainability.

Keywords: Corporate Efficiency; Data Envelopment Analysis; ESG Disclosure; ESG Activities; Corporate Social Responsibility; Stakeholder Engagement; Sustainable Development (search for similar items in EconPapers)
JEL-codes: M14 Q5 Q56 (search for similar items in EconPapers)
Date: 2017-12-11, Revised 2018-06-25
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Related works:
Journal Article: Do environmental, social, and governance activities improve corporate financial performance? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:88720

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