This thesis aims to analyze the impact of Environmental, Social, and Governance activities on the firm value of publicly listed companies in Europe. For this analysis, the data for ESG score and other financial variables is collected from the Refinitiv database from 2010 to 2024. Various statistical techniques are used to examine the relationship, including the diagnostic and robustness test. The findings of this study show a significant negative relationship between ESG and firm value (measured by TobinQ), suggesting that the cost of ESG activities might outweigh the immediate financial benefits. Along with the combined ESG score, the individual components are also analyzed in the whole sample and among the regions. Furthermore, the relationship between the cost of capital with firm value and ESG score is also analyzed. The results show that the cost of capital is significantly negatively related to firm value which shows that a higher cost of capital decreases the firm value. Contrary to this, the positive relationship with ESG shows that ESG activities might not benefit firms in obtaining funds at low cost, although the R-square is very low, suggesting a very small variation in the cost of capital might be caused by the ESG score. The relationship among the variables is also analyzed in different regions (Eastern, Western, Northern, and Southern) and the results show that the negative relationship exists in these regions except the Southern region where the impact is insignificant. Additionally, this thesis also analyzed the impact of the European Union’s directives, mainly NFRD and CSRD. For this, the sample is subdivided into three time periods and the results show that before NFRD, the relationship is insignificant whereas it becomes significant and negative afterwards. This could be due to pressure from stakeholders and authorities to engage in ESG activities but the cost of these activities is more than the financial benefits or companies are not implementing it in such a way that may also enhance financial benefits. To ensure robustness, this thesis employs Quantile regression and the results show that the impact of ESG and sub-components on firm value is significantly negative particularly in higher quantiles whereas the impact in lower quantiles varies. Other than this another proxy is used for firm value (ROA) and the results are quantitatively similar to previous findings. Furthermore, this thesis also addresses the issue of endogeneity by using two-stage least square regression and advancing the dependent variable by one period. The results show that the impact of ESG score, sub-components, and other variables remain quantitatively same even after controlling for endogeneity.
Questa tesi si propone di analizzare l'impatto delle attività ambientali, sociali e di governance (ESG) sul valore aziendale delle società quotate in Europa. Per questa analisi, i dati relativi al punteggio ESG e ad altre variabili finanziarie sono stati raccolti dal database Refinitiv nel periodo 2010-2024. Sono state utilizzate varie tecniche statistiche per esaminare la relazione, inclusi test diagnostici e di robustezza. I risultati di questo studio mostrano una relazione negativa significativa tra ESG e valore aziendale (misurato attraverso TobinQ), suggerendo che i costi delle attività ESG potrebbero superare i benefici finanziari immediati. Oltre al punteggio ESG complessivo, sono stati analizzati anche i singoli componenti sull'intero campione e tra le diverse regioni. Inoltre, è stata analizzata la relazione tra il costo del capitale, il valore aziendale e il punteggio ESG. I risultati mostrano che il costo del capitale è significativamente e negativamente correlato al valore aziendale, indicando che un costo del capitale più elevato riduce il valore aziendale. Contrariamente a ciò, la relazione positiva con ESG indica che le attività ESG potrebbero non avvantaggiare le aziende nell'ottenere finanziamenti a basso costo, sebbene l'R-quadro sia molto basso, suggerendo che solo una piccola variazione del costo del capitale potrebbe essere attribuibile al punteggio ESG. La relazione tra le variabili è stata analizzata anche in diverse regioni (Est, Ovest, Nord e Sud) e i risultati mostrano che la relazione negativa esiste in queste regioni, ad eccezione del Sud, dove l'impatto è insignificante. Inoltre, questa tesi ha analizzato l'impatto delle direttive dell'Unione Europea, principalmente NFRD e CSRD. A tal fine, il campione è stato suddiviso in tre periodi temporali e i risultati mostrano che prima di NFRD la relazione era insignificante, mentre diventa significativa e negativa successivamente. Ciò potrebbe essere dovuto alla pressione di stakeholder e autorità per intraprendere attività ESG, ma i costi di queste attività superano i benefici finanziari o le aziende non le implementano in modo da migliorare anche i benefici finanziari. Per garantire la robustezza, questa tesi utilizza la regressione quantile e i risultati mostrano che l'impatto di ESG e dei suoi sottocomponenti sul valore aziendale è significativamente negativo, in particolare nei quantili più alti, mentre l'impatto nei quantili più bassi varia. Inoltre, è stato utilizzato un altro proxy per il valore aziendale (ROA) e i risultati sono quantitativamente simili a quelli precedenti. Infine, questa tesi affronta il problema dell'endogeneità utilizzando la regressione a due stadi (two-stage least squares) e anticipando la variabile dipendente di un periodo. I risultati mostrano che l'impatto del punteggio ESG, dei sottocomponenti e delle altre variabili rimane quantitativamente invariato anche dopo aver controllato per l'endogene
Beyond Profits: Unraveling the Impact of ESG Initiatives on Firm Valuation / Ranjeeta, Ranjeeta. - (2025 Feb 17).
Beyond Profits: Unraveling the Impact of ESG Initiatives on Firm Valuation
RANJEETA, RANJEETA
2025-02-17
Abstract
This thesis aims to analyze the impact of Environmental, Social, and Governance activities on the firm value of publicly listed companies in Europe. For this analysis, the data for ESG score and other financial variables is collected from the Refinitiv database from 2010 to 2024. Various statistical techniques are used to examine the relationship, including the diagnostic and robustness test. The findings of this study show a significant negative relationship between ESG and firm value (measured by TobinQ), suggesting that the cost of ESG activities might outweigh the immediate financial benefits. Along with the combined ESG score, the individual components are also analyzed in the whole sample and among the regions. Furthermore, the relationship between the cost of capital with firm value and ESG score is also analyzed. The results show that the cost of capital is significantly negatively related to firm value which shows that a higher cost of capital decreases the firm value. Contrary to this, the positive relationship with ESG shows that ESG activities might not benefit firms in obtaining funds at low cost, although the R-square is very low, suggesting a very small variation in the cost of capital might be caused by the ESG score. The relationship among the variables is also analyzed in different regions (Eastern, Western, Northern, and Southern) and the results show that the negative relationship exists in these regions except the Southern region where the impact is insignificant. Additionally, this thesis also analyzed the impact of the European Union’s directives, mainly NFRD and CSRD. For this, the sample is subdivided into three time periods and the results show that before NFRD, the relationship is insignificant whereas it becomes significant and negative afterwards. This could be due to pressure from stakeholders and authorities to engage in ESG activities but the cost of these activities is more than the financial benefits or companies are not implementing it in such a way that may also enhance financial benefits. To ensure robustness, this thesis employs Quantile regression and the results show that the impact of ESG and sub-components on firm value is significantly negative particularly in higher quantiles whereas the impact in lower quantiles varies. Other than this another proxy is used for firm value (ROA) and the results are quantitatively similar to previous findings. Furthermore, this thesis also addresses the issue of endogeneity by using two-stage least square regression and advancing the dependent variable by one period. The results show that the impact of ESG score, sub-components, and other variables remain quantitatively same even after controlling for endogeneity.File | Dimensione | Formato | |
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