ESG Investing: What is the Relationship between ESG, E, S, and G Scores and Financial Performance in the Nordics?

Camilla Foss Evensen & Madelen Fredriksen

Student thesis: Master thesis


Businesses of today are heavily encouraged by different stakeholders to invest into various environmental, social, and governance (ESG) engagements to help reach societal goals. But does a better ESG performance increase the value of the shareholders of the businesses? As researchers have not reached a uniform conclusion regarding this question, the purpose of this research is to investigate that very question in the context of corporate acquisitions. The research uses a sample of international mergers and acquisitions (M&A) and studies the relationship of ESG performance and value creation of a target and acquiror using multivariate Ordinary Least Squares (OLS) regressions. The study finds that targets with better ESG performance are not enjoying higher acquisition premiums in a M&A setting. However, the results show that different dimensions of ESG affect the value creation of a target in opposing ways, which might be one of the reasons previous studies have presented mixed results. When examining the effect of ESG on acquirors, the research finds that by acquiring a relatively more ESG aware target, the acquiror can improve its own ESG performance post acquisition. Furthermore, an improvement in the acquirors own ESG performance post acquisition is found to lead to value creation, which is in support of the stakeholder theory. However, the results show that merely acquiring a target with a higher ESG score will not lead to value creation. It is postulated that the acquirors need to be willing to learn from the target and embrace the target’s higher ESG performance in order to be able to enjoy higher synergies from the acquisition. The presented empirical evidence should incentivize corporate managers to take ESG attributes into account when formulating their M&A strategy and selecting a target.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2022
Number of pages260
SupervisorsMarcel Fischer