Research Article
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Year 2024, Volume: 19 Issue: 1, 32 - 35, 30.07.2024
https://doi.org/10.17261/Pressacademia.2024.1905

Abstract

References

  • Alareeni, B.A. & Hamdan, A. (2020). ESG impact on performance of US S&P 500-listed firms. Corporate Governance, 20(7), 1409-1428. https://doi.org/10.1108/CG-06-2020-0258
  • Albitar, K., Hussainey, K., Kolade, N. & Gerged, A.M. (2020). ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms. International Journal of Accounting & Information Management, 28(3), 429-444. https://doi.org/10.1108/IJAIM-09-2019-0108
  • Carnini Pulino, S., Ciaburri, M., Magnanelli, B. S., & Nasta, L. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 7595. https://doi.org/10.3390/su14137595
  • Clark, G., Feiner, A., & Viehs, M. (2015). From the stockholder to the stakeholder: how sustainability can drive financial outperformance. http://dx.doi.org/10.2139/ssrn.2508281
  • Demiraj, R., Dsouza, S., & Abiad, M. (2022). Working capital management impact on profitability: pre-pandemic and pandemic evidence from the European Automotive Industry. Risks, 10(12), 236-249. https://doi.org/10.3390/risks10120236
  • Demıraj, R., Dsouza, S., & Demiraj, E. (2023). ESG scores relationship with firm performance: Panel data evidence from the European tourism industry. PressAcademia Procedia, 16(1), 116-120. https://doi.org/10.17261/Pressacademia.2023.1674
  • Dsouza, S., Demiraj, R., & Habibniya, H. (2023). Impact of liquidity and leverage on performance: Panel data evidence of Hotels and Entertainment services industry in the MENA Region. International Journal of Hospitality and Tourism Systems, 16(3), 165-179. https://ssrn.com/abstract=4493802
  • European Green Deal (2024). European Council. Retrieved July 11, 2024, from https://www.consilium.europa.eu/en/policies/green-deal
  • Eurostat. (2024). Gross Domestic Product in the European Union. Retrieved July 11, 2024. https://doi.org/10.2908/NAMQ_10_GDP
  • Habibniya, H., Dsouza, S., Rabbani, M. R., Nawaz, N., & Demiraj, R. (2022). Impact of capital structure on profitability: panel data evidence of the telecom industry in the United States. Risks, 10(8), 157-172. https://doi.org/10.3390/risks10080157
  • Implementing and Delegated Acts - SFDR (2024). European Commission. Retrieved July 11, 2024, from https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/sustainable-finance-disclosures-regulation_en
  • Jeroen Derwall, Nadja Guenster, Rob Bauer & Kees Koedijk (2005) The eco-efficiency premium puzzle. Financial Analysts Journal, 61(2), 51-63.
  • Junius, D., Adisurjo, A., Rijanto, Y. A., & Adelina, Y. E. (2020). The impact of esg performance to firm performance and market value. Jurnal Aplikasi Akuntansi, 5(1), 21–41. https://doi.org/10.29303/jaa.v5i1.84
  • Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697-1724. https://doi.org/10.2308/accr-51383
  • Rahman, H. U., Zahid, M., & Al-Faryan, M. A. S. (2023). ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment. Journal of Cleaner Production, 404, 136859.
  • Singh, S., Tabassum, N., Darwish, T. K., & Batsakis, G. (2018). Corporate governance and Tobin's Q as a measure of organizational performance. British Journal of Management, 29(1), 171-190.
  • Wasiuzzaman, S., Ibrahim, S.A. & Kawi, F. (2022). Environmental, social and governance (ESG) disclosure and firm performance: does national culture matter? Meditari Accountancy Research, fothcoming. https://doi.org/10.1108/MEDAR-06-2021-1356

COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT

Year 2024, Volume: 19 Issue: 1, 32 - 35, 30.07.2024
https://doi.org/10.17261/Pressacademia.2024.1905

Abstract

Purpose- Engaging in ESG activities entails significant costs that, without a doubt, impact the firm's financial performance and ultimately its market performance. However, it is believed that these costs are offset by the positive impact ESG brings in terms of improved reputation and public perception, including current and potential customers and investors. Research on the relationship between ESG scores and firm performance has produced mixed results, raising concerns about whether the positive effect of ESG is enough to counter the negative effect of associated costs, or whether there are other factors that may moderate this relationship. The purpose of this study is to explore the moderating effect of the World Bank’s Governance Indicators on the relationship between a firm’s ESG scores and its financial and market performance.
Methodology- To achieve the aim of the study, we have collected data for all listed firms from the European continent with ESG scores available on the Refinitiv database. After cleaning the data for missing values, we obtained an unbalanced and cross-sectional panel of 13,043 firm-year observations from the 2,083 firms used in the study. We have employed 2SLS Regression, using published financial information spanning over a period of 12 years, from 2011 to 2022.
Findings- The results suggest the World Bank’s Worldwide Governance Indicators have a moderating effect on the relationship between ESG and firms’ financial performance and market performance.
Conclusion- Our findings suggest that the positive impact of ESG activities on financial performance is more pronounced in countries rated higher in Worldwide Governance Indicators. The implementation of ESG practices is generally valued by investors affecting positively the market performance, however, this may not be as strong in countries with high Governance scores where expectations for sustainable business practices are already high.

References

  • Alareeni, B.A. & Hamdan, A. (2020). ESG impact on performance of US S&P 500-listed firms. Corporate Governance, 20(7), 1409-1428. https://doi.org/10.1108/CG-06-2020-0258
  • Albitar, K., Hussainey, K., Kolade, N. & Gerged, A.M. (2020). ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms. International Journal of Accounting & Information Management, 28(3), 429-444. https://doi.org/10.1108/IJAIM-09-2019-0108
  • Carnini Pulino, S., Ciaburri, M., Magnanelli, B. S., & Nasta, L. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 7595. https://doi.org/10.3390/su14137595
  • Clark, G., Feiner, A., & Viehs, M. (2015). From the stockholder to the stakeholder: how sustainability can drive financial outperformance. http://dx.doi.org/10.2139/ssrn.2508281
  • Demiraj, R., Dsouza, S., & Abiad, M. (2022). Working capital management impact on profitability: pre-pandemic and pandemic evidence from the European Automotive Industry. Risks, 10(12), 236-249. https://doi.org/10.3390/risks10120236
  • Demıraj, R., Dsouza, S., & Demiraj, E. (2023). ESG scores relationship with firm performance: Panel data evidence from the European tourism industry. PressAcademia Procedia, 16(1), 116-120. https://doi.org/10.17261/Pressacademia.2023.1674
  • Dsouza, S., Demiraj, R., & Habibniya, H. (2023). Impact of liquidity and leverage on performance: Panel data evidence of Hotels and Entertainment services industry in the MENA Region. International Journal of Hospitality and Tourism Systems, 16(3), 165-179. https://ssrn.com/abstract=4493802
  • European Green Deal (2024). European Council. Retrieved July 11, 2024, from https://www.consilium.europa.eu/en/policies/green-deal
  • Eurostat. (2024). Gross Domestic Product in the European Union. Retrieved July 11, 2024. https://doi.org/10.2908/NAMQ_10_GDP
  • Habibniya, H., Dsouza, S., Rabbani, M. R., Nawaz, N., & Demiraj, R. (2022). Impact of capital structure on profitability: panel data evidence of the telecom industry in the United States. Risks, 10(8), 157-172. https://doi.org/10.3390/risks10080157
  • Implementing and Delegated Acts - SFDR (2024). European Commission. Retrieved July 11, 2024, from https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/sustainable-finance-disclosures-regulation_en
  • Jeroen Derwall, Nadja Guenster, Rob Bauer & Kees Koedijk (2005) The eco-efficiency premium puzzle. Financial Analysts Journal, 61(2), 51-63.
  • Junius, D., Adisurjo, A., Rijanto, Y. A., & Adelina, Y. E. (2020). The impact of esg performance to firm performance and market value. Jurnal Aplikasi Akuntansi, 5(1), 21–41. https://doi.org/10.29303/jaa.v5i1.84
  • Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697-1724. https://doi.org/10.2308/accr-51383
  • Rahman, H. U., Zahid, M., & Al-Faryan, M. A. S. (2023). ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment. Journal of Cleaner Production, 404, 136859.
  • Singh, S., Tabassum, N., Darwish, T. K., & Batsakis, G. (2018). Corporate governance and Tobin's Q as a measure of organizational performance. British Journal of Management, 29(1), 171-190.
  • Wasiuzzaman, S., Ibrahim, S.A. & Kawi, F. (2022). Environmental, social and governance (ESG) disclosure and firm performance: does national culture matter? Meditari Accountancy Research, fothcoming. https://doi.org/10.1108/MEDAR-06-2021-1356
There are 17 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Enida Demiraj 0000-0001-9404-1812

Rezart Demiraj This is me 0000-0001-8785-9042

Suzan Dsouza This is me 0000-0002-6274-6110

Publication Date July 30, 2024
Submission Date May 15, 2024
Acceptance Date June 15, 2024
Published in Issue Year 2024 Volume: 19 Issue: 1

Cite

APA Demiraj, E., Demiraj, R., & Dsouza, S. (2024). COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT. PressAcademia Procedia, 19(1), 32-35. https://doi.org/10.17261/Pressacademia.2024.1905
AMA Demiraj E, Demiraj R, Dsouza S. COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT. PAP. July 2024;19(1):32-35. doi:10.17261/Pressacademia.2024.1905
Chicago Demiraj, Enida, Rezart Demiraj, and Suzan Dsouza. “COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT”. PressAcademia Procedia 19, no. 1 (July 2024): 32-35. https://doi.org/10.17261/Pressacademia.2024.1905.
EndNote Demiraj E, Demiraj R, Dsouza S (July 1, 2024) COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT. PressAcademia Procedia 19 1 32–35.
IEEE E. Demiraj, R. Demiraj, and S. Dsouza, “COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT”, PAP, vol. 19, no. 1, pp. 32–35, 2024, doi: 10.17261/Pressacademia.2024.1905.
ISNAD Demiraj, Enida et al. “COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT”. PressAcademia Procedia 19/1 (July 2024), 32-35. https://doi.org/10.17261/Pressacademia.2024.1905.
JAMA Demiraj E, Demiraj R, Dsouza S. COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT. PAP. 2024;19:32–35.
MLA Demiraj, Enida et al. “COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT”. PressAcademia Procedia, vol. 19, no. 1, 2024, pp. 32-35, doi:10.17261/Pressacademia.2024.1905.
Vancouver Demiraj E, Demiraj R, Dsouza S. COUNTRY GOVERNANCE SCORES AS MODERATORS OF ESG IMPACT ON FIRM PERFORMANCE IN THE EUROPEAN CONTEXT. PAP. 2024;19(1):32-5.

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