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Impacts of Environmental, Social and Governance (ESG) Performance on Market Value: The Role of Firm Size

Year 2022, Volume: 17 Issue: 3, 787 - 809, 01.12.2022
https://doi.org/10.17153/oguiibf.1098419

Abstract

This study examines the relevance of environmental, social and governance (ESG) performance to market value, and the role of firm size in this relevance for companies listed in Borsa Istanbul (BIST), one of the developing markets. Following results were obtained from extended static linear panel regression models based on Ohlson (1995). Firm size has an important role in explaining the differences between firms in terms of the effects of ESG criteria on market value. Both ESG criteria and each of E, S, and G components have a significant positive effect on the market value separately, under the influence of firm size. In relatively larger companies, the positive effects are greater.

References

  • Aboud, A., & Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies.
  • Ateş, S. (2021). Kurumsal Sosyal Performansa Piyasa Tepkisi: BIST Örneği. Muhasebe ve Finansman Dergisi, (90), 149-164.
  • Azmi, W., Hassan, M. K., Houston, R., & Karim, M. S. (2021). ESG activities and banking performance: International evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 70, 101277.
  • Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of business ethics, 97(1), 71-86.
  • Barth, M. E., & Clinch, G. (2009). Scale effects in capital markets‐based accounting research. Journal of Business Finance & Accounting, 36(3‐4), 253-288.
  • Behl, A., Kumari, P. S., Makhija, H., & Sharma, D. (2021). Exploring the relationship of ESG score and firm value using cross-lagged panel analyses: Case of the Indian energy sector. Annals of Operations Research, 1-26.
  • Belyaeva, Z., Shams, S. R., Santoro, G., & Grandhi, B. (2020). Unpacking stakeholder relationship management in the public and private sectors: the comparative insights. EuroMed Journal of Business.
  • Bhattacharya, S., & Sharma, D. (2019). Do environment, social and governance performance impact credit ratings: a study from India. International Journal of Ethics and Systems.
  • Bilgin, M. H., Danisman, G. O., Demir, E., & Tarazi, A. (2021). Bank credit in uncertain times: Islamic vs. conventional banks. Finance Research Letters, 39, 101563.
  • Bowman, D., Londono, J. M., & Sapriza, H. (2015). US unconventional monetary policy and transmission to emerging market economies. Journal of International Money and Finance, 55, 27-59.
  • Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial management, 35(3), 97-116.
  • Branco, M. C., & Rodrigues, L. L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of business Ethics, 83(4), 685-701.
  • Cai, L., Cui, J., & Jo, H. (2016). Corporate environmental responsibility and firm risk. Journal of Business Ethics, 139(3), 563-594.
  • De Klerk, M., De Villiers, C., & Van Staden, C. (2015). The influence of corporate social responsibility disclosure on share prices: Evidence from the United Kingdom. Pacific Accounting Review.
  • Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45-64.
  • Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233.
  • Ghoul, S. E., Guedhami, O., & Kim, Y. (2017). Country-level institutions, firm value, and the role of corporate social responsibility initiatives. Journal of International Business Studies, 48(3), 360-385.
  • Hassel, L., Nilsson, H., & Nyquist, S. (2005). The value relevance of environmental performance. European Accounting Review, 14(1), 41-61.
  • Hausman, J., & Wongswan, J. (2011). Global asset prices and FOMC announcements. Journal of International Money and Finance, 30(3), 547-571.
  • Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of management journal, 43(3), 249-267.
  • Jha, M. K., & Rangarajan, K. (2020). Analysis of corporate sustainability performance and corporate financial performance causal linkage in the Indian context. Asian Journal of Sustainability and Social Responsibility, 5(1), 1-30.
  • Johnston, D. M., Sefcik, S. E., & Soderstrom, N. S. (2008). The value relevance of greenhouse gas emissions allowances: An exploratory study in the related United States SO2 market. European Accounting Review, 17(4), 747-764.
  • Kiss, A. N., & Danis, W. M. (2008). Country institutional context, social networks, and new venture internationalization speed. European Management Journal, 26(6), 388-399.
  • Kogut, B. (2003). The globalizing learning economy.
  • Leung, K., Bhagat, R. S., Buchan, N. R., Erez, M., & Gibson, C. B. (2005). Culture and international business: Recent advances and their implications for future research. Journal of international business studies, 36(4), 357-378.
  • Lewin, A. Y., & Kim, J. (2004). The nation state and culture as influences on organizational change and innovation. In Handbook of organizational change and development (pp. 324-353).
  • Lo, K., & Lys, T. (2000). The Ohlson model: contribution to valuation theory, limitations, and empirical applications. Journal of Accounting, Auditing & Finance, 15(3), 337-367.
  • Lourenço, I. C., Branco, M. C., Curto, J. D., & Eugénio, T. (2012). How does the market value corporate sustainability performance?. Journal of business ethics, 108(4), 417-428.
  • Matolcsy, Z. P., & Wyatt, A. (2008). The association between technological conditions and the market value of equity. The Accounting Review, 83(2), 479-518.
  • Mattison, R. ve Longevialle, B. (2022). Key Trends that Will Drive the ESG Agenda in 2022. S&P Global January 31, 2022.
  • McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of management studies, 43(1), 1-18.
  • Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. the Journal of Business, 34(4), 411-433.
  • Miralles-Quirós, M. M., Miralles-Quirós, J. L., & Valente Gonçalves, L. M. (2018). The value relevance of environmental, social, and governance performance: The Brazilian case. Sustainability, 10(3), 574.
  • Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
  • Morel, M. (2003). Endogenous parameter time series estimation of the Ohlson model: Linear and nonlinear analyses. Journal of Business Finance & Accounting, 30(9‐10), 1341-1362.
  • Myers, J. N. (2000). Discussion:“The Feltham-Ohlson (1995) Model: Empirical Implications”. Journal of Accounting, Auditing & Finance, 15(3), 332-335.
  • Odell, J., & Ali, U. (2016). ESG investing in emerging and frontier markets. Journal of Applied Corporate Finance, 28(2), 96-101.
  • Odera, O., Scott, A. H., & Gow, J. (2016). Factors influencing corporate social and environmental disclosures: a systematic review. International Journal of Business Governance and Ethics, 11(2), 116-134.
  • Ohlson, J. A. (1995). Earnings, book values, and dividends in equity valuation. Contemporary accounting research, 11(2), 661-687.
  • Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization studies, 24(3), 403-441.
  • Patel, P. C., Pearce II, J. A., & Oghazi, P. (2021). Not so myopic: Investors lowering short-term growth expectations under high industry ESG-sales-related dynamism and predictability. Journal of Business Research, 128, 551-563.
  • Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of international business studies, 39(5), 920-936.
  • Rajgopal, S., Venkatachalam, M., & Kotha, S. (2003). The value relevance of network advantages: The case of e–commerce firms. Journal of Accounting Research, 41(1), 135-162.
  • Schadewitz, H., & Niskala, M. (2010). Communication via responsibility reporting and its effect on firm value in Finland. Corporate social responsibility and environmental management, 17(2), 96-106.
  • Şişman, M. E., & Çankaya, S. Çevresel, Sosyal ve Kurumsal Yönetişim (ESG) Verilerinin Firmaların Finansal Performansına Etkisi: Hava Yolu Sektörü Üzerine Bir Çalışma. Çukurova Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 25(1), 73-91.
  • Teece, D. J. (1982). Towards an economic theory of the multiproduct firm. Journal of Economic Behavior & Organization, 3(1), 39-63.
  • Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value?. Finance Research Letters, 39, 101593.
  • Yildirim, Z. (2016). Global financial conditions and asset markets: Evidence from fragile emerging economies. Economic Modelling, 57, 208-220.
  • Zumente, I., & Bistrova, J. (2021). ESG importance for long-term shareholder value creation: Literature vs. practice. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 127.

Çevresel, Sosyal ve Kurumsal Yönetim (ESG) Performansının Piyasa Değeri Üzerindeki Etkisi: Firma Büyüklüğünün Rolü

Year 2022, Volume: 17 Issue: 3, 787 - 809, 01.12.2022
https://doi.org/10.17153/oguiibf.1098419

Abstract

Çalışmada gelişmekte olan piyasalardan Borsa İstanbul’da (BIST) işlem gören işletmelerin çevresel, sosyal ve kurumsal yönetim (ESG) kriterleri konusundaki performanslarının piyasa değeri ile ilişkisi ve bu ilişkide firma büyüklüğünün rolü araştırılmaktadır. Ohlson (1995) değerleme modelini temel alan genişletilmiş statik doğrusal panel regresyon modeli tahminlerinden izleyen sonuçlar elde edilmiştir. Firma büyüklüğü, ESG kriterlerinin piyasa değeri üzerindeki etkileri bakımından firmalar arası farklılıkları açıklamada önemli bir role sahiptir. Firma büyüklüğünün etkisi altında hem ESG kriterlerinin hem de E, S ve G bileşenlerinin ayrı ayrı her birinin piyasa değeri üzerinde anlamlı pozitif etkisi vardır. Görece daha büyük şirketlerde pozitif etkilerin daha büyük olduğu görülmektedir.

References

  • Aboud, A., & Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies.
  • Ateş, S. (2021). Kurumsal Sosyal Performansa Piyasa Tepkisi: BIST Örneği. Muhasebe ve Finansman Dergisi, (90), 149-164.
  • Azmi, W., Hassan, M. K., Houston, R., & Karim, M. S. (2021). ESG activities and banking performance: International evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 70, 101277.
  • Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of business ethics, 97(1), 71-86.
  • Barth, M. E., & Clinch, G. (2009). Scale effects in capital markets‐based accounting research. Journal of Business Finance & Accounting, 36(3‐4), 253-288.
  • Behl, A., Kumari, P. S., Makhija, H., & Sharma, D. (2021). Exploring the relationship of ESG score and firm value using cross-lagged panel analyses: Case of the Indian energy sector. Annals of Operations Research, 1-26.
  • Belyaeva, Z., Shams, S. R., Santoro, G., & Grandhi, B. (2020). Unpacking stakeholder relationship management in the public and private sectors: the comparative insights. EuroMed Journal of Business.
  • Bhattacharya, S., & Sharma, D. (2019). Do environment, social and governance performance impact credit ratings: a study from India. International Journal of Ethics and Systems.
  • Bilgin, M. H., Danisman, G. O., Demir, E., & Tarazi, A. (2021). Bank credit in uncertain times: Islamic vs. conventional banks. Finance Research Letters, 39, 101563.
  • Bowman, D., Londono, J. M., & Sapriza, H. (2015). US unconventional monetary policy and transmission to emerging market economies. Journal of International Money and Finance, 55, 27-59.
  • Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial management, 35(3), 97-116.
  • Branco, M. C., & Rodrigues, L. L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of business Ethics, 83(4), 685-701.
  • Cai, L., Cui, J., & Jo, H. (2016). Corporate environmental responsibility and firm risk. Journal of Business Ethics, 139(3), 563-594.
  • De Klerk, M., De Villiers, C., & Van Staden, C. (2015). The influence of corporate social responsibility disclosure on share prices: Evidence from the United Kingdom. Pacific Accounting Review.
  • Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45-64.
  • Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233.
  • Ghoul, S. E., Guedhami, O., & Kim, Y. (2017). Country-level institutions, firm value, and the role of corporate social responsibility initiatives. Journal of International Business Studies, 48(3), 360-385.
  • Hassel, L., Nilsson, H., & Nyquist, S. (2005). The value relevance of environmental performance. European Accounting Review, 14(1), 41-61.
  • Hausman, J., & Wongswan, J. (2011). Global asset prices and FOMC announcements. Journal of International Money and Finance, 30(3), 547-571.
  • Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of management journal, 43(3), 249-267.
  • Jha, M. K., & Rangarajan, K. (2020). Analysis of corporate sustainability performance and corporate financial performance causal linkage in the Indian context. Asian Journal of Sustainability and Social Responsibility, 5(1), 1-30.
  • Johnston, D. M., Sefcik, S. E., & Soderstrom, N. S. (2008). The value relevance of greenhouse gas emissions allowances: An exploratory study in the related United States SO2 market. European Accounting Review, 17(4), 747-764.
  • Kiss, A. N., & Danis, W. M. (2008). Country institutional context, social networks, and new venture internationalization speed. European Management Journal, 26(6), 388-399.
  • Kogut, B. (2003). The globalizing learning economy.
  • Leung, K., Bhagat, R. S., Buchan, N. R., Erez, M., & Gibson, C. B. (2005). Culture and international business: Recent advances and their implications for future research. Journal of international business studies, 36(4), 357-378.
  • Lewin, A. Y., & Kim, J. (2004). The nation state and culture as influences on organizational change and innovation. In Handbook of organizational change and development (pp. 324-353).
  • Lo, K., & Lys, T. (2000). The Ohlson model: contribution to valuation theory, limitations, and empirical applications. Journal of Accounting, Auditing & Finance, 15(3), 337-367.
  • Lourenço, I. C., Branco, M. C., Curto, J. D., & Eugénio, T. (2012). How does the market value corporate sustainability performance?. Journal of business ethics, 108(4), 417-428.
  • Matolcsy, Z. P., & Wyatt, A. (2008). The association between technological conditions and the market value of equity. The Accounting Review, 83(2), 479-518.
  • Mattison, R. ve Longevialle, B. (2022). Key Trends that Will Drive the ESG Agenda in 2022. S&P Global January 31, 2022.
  • McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of management studies, 43(1), 1-18.
  • Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. the Journal of Business, 34(4), 411-433.
  • Miralles-Quirós, M. M., Miralles-Quirós, J. L., & Valente Gonçalves, L. M. (2018). The value relevance of environmental, social, and governance performance: The Brazilian case. Sustainability, 10(3), 574.
  • Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
  • Morel, M. (2003). Endogenous parameter time series estimation of the Ohlson model: Linear and nonlinear analyses. Journal of Business Finance & Accounting, 30(9‐10), 1341-1362.
  • Myers, J. N. (2000). Discussion:“The Feltham-Ohlson (1995) Model: Empirical Implications”. Journal of Accounting, Auditing & Finance, 15(3), 332-335.
  • Odell, J., & Ali, U. (2016). ESG investing in emerging and frontier markets. Journal of Applied Corporate Finance, 28(2), 96-101.
  • Odera, O., Scott, A. H., & Gow, J. (2016). Factors influencing corporate social and environmental disclosures: a systematic review. International Journal of Business Governance and Ethics, 11(2), 116-134.
  • Ohlson, J. A. (1995). Earnings, book values, and dividends in equity valuation. Contemporary accounting research, 11(2), 661-687.
  • Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization studies, 24(3), 403-441.
  • Patel, P. C., Pearce II, J. A., & Oghazi, P. (2021). Not so myopic: Investors lowering short-term growth expectations under high industry ESG-sales-related dynamism and predictability. Journal of Business Research, 128, 551-563.
  • Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of international business studies, 39(5), 920-936.
  • Rajgopal, S., Venkatachalam, M., & Kotha, S. (2003). The value relevance of network advantages: The case of e–commerce firms. Journal of Accounting Research, 41(1), 135-162.
  • Schadewitz, H., & Niskala, M. (2010). Communication via responsibility reporting and its effect on firm value in Finland. Corporate social responsibility and environmental management, 17(2), 96-106.
  • Şişman, M. E., & Çankaya, S. Çevresel, Sosyal ve Kurumsal Yönetişim (ESG) Verilerinin Firmaların Finansal Performansına Etkisi: Hava Yolu Sektörü Üzerine Bir Çalışma. Çukurova Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 25(1), 73-91.
  • Teece, D. J. (1982). Towards an economic theory of the multiproduct firm. Journal of Economic Behavior & Organization, 3(1), 39-63.
  • Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value?. Finance Research Letters, 39, 101593.
  • Yildirim, Z. (2016). Global financial conditions and asset markets: Evidence from fragile emerging economies. Economic Modelling, 57, 208-220.
  • Zumente, I., & Bistrova, J. (2021). ESG importance for long-term shareholder value creation: Literature vs. practice. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 127.
There are 49 citations in total.

Details

Primary Language Turkish
Journal Section Articles
Authors

Gülşah Kulalı 0000-0001-7843-0965

Publication Date December 1, 2022
Submission Date April 5, 2022
Published in Issue Year 2022 Volume: 17 Issue: 3

Cite

APA Kulalı, G. (2022). Çevresel, Sosyal ve Kurumsal Yönetim (ESG) Performansının Piyasa Değeri Üzerindeki Etkisi: Firma Büyüklüğünün Rolü. Eskişehir Osmangazi Üniversitesi İktisadi Ve İdari Bilimler Dergisi, 17(3), 787-809. https://doi.org/10.17153/oguiibf.1098419