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The impact of ESG on corporate financial performance: Empirical evidence from more than 1400 Western companies.

Iweins, Hadrien
(2022)

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Iweins_90752000_2022.pdf
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Details

Supervisors
Grégoire, Philippe
Faculty
Louvain School of Management
Degree label
Master [120] : ingénieur de gestion, à finalité spécialisée
Abstract
The purpose of this thesis is to analyze environmental, social and governance performance (ESGP) and evaluate their impact on corporate financial performance (CFP). To study this relationship, ESG and financial data are retrieved from Refinitiv Thompson Reuters database. We focus on the two accounting financial performance indicators: Return on equity (ROE) and Return on assets (ROA). The study covers a large sample of Western companies from Europe, the UK, the USA and Canada for the business years 2018 to 2022 (7205 company-year observations). The results indicate a positive impact of ESG performance on ROA and a less significant effect on ROE. When studying the individual ESG pillars, the environmental and governance pillars show a significant and positive impact on ROA while social pillar shows no significant effect. In addition to that, it is demonstrated that ESG has a higher impact on financial performances for the innovation driven sectors in comparison with the other sectors. Additional analysis concerning market capitalization do not provide significant results. The analysis represents a contribution to the existing literature since it confirms on a large and international sample of companies earlier conclusions mainly made on national samples. In addition, individual pillars impact are also studied.