The Impact of Environmental Social and Governance Factors on Firm Performance: A Quantitative Study on U.S Listed Firms in 2010-2018

Bianca Evy Zoé Hammelina Martin & Carl Ludvig Mikael Dahlström

Student thesis: Master thesis

Abstract

This paper quantitatively investigates whether non-financial aspects, such as Environmental, Social and Governance (ESG) have an influence on firm performance. More specifically, the study explores whether ESG performance can add any explanatory value to Annual Stock Returns and if such performance is related to the Net Income and Return on Assets of the firm. The study is conducted on 423 U.S listed firms in the time period 2010-2018. Moreover, multiple linear regression models have been applied to assess the relationship, applying four different ESG scores (ESG, ENV, SOC, GOV) and their respective score development, of the 3807 observation in the sample. The findings deducted from the empirical analysis, concludes that ESG factors, notably the Environmental score, is negatively associated with stock market returns in the sample. Conversely however, the Environmental performance positively influences the Net Income and ROA in the sample. Social and Governance factors are however found to be negatively associated with Net Income, whilst no statistical inferences could be concluded on the remaining score variables and ROA. The findings add value to the existing literature in the field by exploring additional dimensions of ESG. Moreover, the results can be useful in terms of corporate strategy and investments within the field of sustainability.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages117