A master thesis from Aalborg University
How Environmental and Social practices affect corporate financial performance and valuation
Author(s)
Term
4. semester
Publication year
2024
Submitted on
2024-10-16
Pages
79 pages
Abstract
This thesis investigates the relationship between corporate sustainability initiatives, particularly the environmental and social pillars of ESG disclosure and corporate financial performance and firm value. While conducting the research, a sum of 84 publicly traded companies with highest ESG exposure industries were selected ranging the dataset from 2014-2023 sourcing all the data from The Thomson Reuters Eikon Database. A panel structured dataset was constructed for all the empirical works. The findings revealed mixed results for the stated relationship for firms’ core financial performance and valuation. While the environmental initiatives seem to have a negative impact on the financial performance, possibly due to high initial costs in the short run, the social pillar demonstrated a positive significant relationship that makes the conversion even in the short-run profitability. Different findings were observed when examining the same relationship with firm value. Even the environmental pillar showed a positive significant impact on the long-term considerations of firm value. Moreover, the impact of environmental and social pillars was also observed when the variables were isolated. While it didn’t show any promising results for immediate profitability on their own and they remain positive and significant for firm valuation. That opens the door for further investigation about the effectiveness of environmental and social pillars in the short and long-term. This study aims not only to provide better insights into previous related research but also to benefit researchers, managers and policymakers to make strategic practical decisions.
Documents
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