Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms
This study scrutinizes the potential correlation between Environmental, Social, and Governance (ESG) scores and the profitability of firms listed in the selected STOXX Europe 600 index. Utilizing panel regression analysis, the study examines data from 385 non-financial companies over the period 2017...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2024-09-01
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| Series: | Investment Management & Financial Innovations |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20633/IMFI_2024_03_Musa.pdf |
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| _version_ | 1832569075438452736 |
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| author | Hussam Musa Peter Krištofik Yaroslav Lysenko Juraj Medzihorsky |
| author_facet | Hussam Musa Peter Krištofik Yaroslav Lysenko Juraj Medzihorsky |
| author_sort | Hussam Musa |
| collection | DOAJ |
| description | This study scrutinizes the potential correlation between Environmental, Social, and Governance (ESG) scores and the profitability of firms listed in the selected STOXX Europe 600 index. Utilizing panel regression analysis, the study examines data from 385 non-financial companies over the period 2017 to 2021, correlating CSRHub's ESG scores and selected financial variables with corporate profitability measured by ROA. The investigation reveals that, overall, ESG scores do not have a significant impact on profitability, except for the ESG-community sub-score, which shows a slight negative influence. Thus, this paper partially supports studies that show a negative correlation between ESG and profitability, even though such results are in the minority in the literature. The overall results suggest that while ESG scores may reflect a company's ethical stance, they are not a predominant factor influencing its profitability. However, this is not the case for leverage, as the importance of capital structure for profitability is confirmed.
AcknowledgmentThis research has been supported by the Scientific Grant Agency of the Slovak Republic under project VEGA No. 1/0579/21. |
| format | Article |
| id | doaj-art-c7e5b5a922564316b200b3439d4d7d29 |
| institution | Kabale University |
| issn | 1810-4967 1812-9358 |
| language | English |
| publishDate | 2024-09-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj-art-c7e5b5a922564316b200b3439d4d7d292025-02-02T23:18:33ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582024-09-0121334435610.21511/imfi.21(3).2024.2820633Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firmsHussam Musa0https://orcid.org/0000-0002-4492-8770Peter Krištofik1https://orcid.org/0000-0002-7612-0418Yaroslav Lysenko2https://orcid.org/0000-0001-7852-6609Juraj Medzihorsky3https://orcid.org/0000-0001-6689-2097Ph.D. Prof. Ing., Department of Finance and Accounting, Faculty of Economics, Matej Bel University, SlovakiaPh.D., Prof. Ing, Department of Finance and Accounting, Faculty of Economics, Matej Bel University, SlovakiaMgr., Department of Finance and Accounting, Faculty of Economics, Matej Bel University, SlovakiaPh.D., Ing., Department of Finance and Accounting, Faculty of Economics, Matej Bel University, SlovakiaThis study scrutinizes the potential correlation between Environmental, Social, and Governance (ESG) scores and the profitability of firms listed in the selected STOXX Europe 600 index. Utilizing panel regression analysis, the study examines data from 385 non-financial companies over the period 2017 to 2021, correlating CSRHub's ESG scores and selected financial variables with corporate profitability measured by ROA. The investigation reveals that, overall, ESG scores do not have a significant impact on profitability, except for the ESG-community sub-score, which shows a slight negative influence. Thus, this paper partially supports studies that show a negative correlation between ESG and profitability, even though such results are in the minority in the literature. The overall results suggest that while ESG scores may reflect a company's ethical stance, they are not a predominant factor influencing its profitability. However, this is not the case for leverage, as the importance of capital structure for profitability is confirmed. AcknowledgmentThis research has been supported by the Scientific Grant Agency of the Slovak Republic under project VEGA No. 1/0579/21.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20633/IMFI_2024_03_Musa.pdfcompany performanceCSRHubESGprofitabilitystakeholder approachSTOXX Europe 600 |
| spellingShingle | Hussam Musa Peter Krištofik Yaroslav Lysenko Juraj Medzihorsky Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms Investment Management & Financial Innovations company performance CSRHub ESG profitability stakeholder approach STOXX Europe 600 |
| title | Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms |
| title_full | Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms |
| title_fullStr | Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms |
| title_full_unstemmed | Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms |
| title_short | Is there a connection between ESG scores and a company’s profitability? Empirical evidence on selected Stoxx Europe 600 firms |
| title_sort | is there a connection between esg scores and a company s profitability empirical evidence on selected stoxx europe 600 firms |
| topic | company performance CSRHub ESG profitability stakeholder approach STOXX Europe 600 |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20633/IMFI_2024_03_Musa.pdf |
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