ESG performance and firm value: The moderating role of ownership concentration

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

The shift towards sustainability has resulted in more disclosures regarding environmental, social, and governance (ESG) issues. This study explores how ESG scores impact firm value in the presence of concentrated ownership. The sample consists of 15,640 firm year observations across 46 countries from 2011–2020. The results of this study show that the ESG score has a positive association with the firm value, supporting the stakeholder theory. Further results indicate that ownership concentration (OC) has a negative moderation effect on the association between ESG and firm value, supporting the entrenchment effect. The results are consistent with the alternative measures of OC The results hold for the two-stage least squares (2SLS) model used to address any endogeneity issue between ESG score and firm value.

Keywords: Refinitiv ESG Score, Stakeholder Theory, Expropriation Hypothesis, Ownership Concentration, Herfindahl-Hirschman Index, Tobin’s Q

Authors’ individual contribution: Conceptualization — A.S. and A.; Methodology — A.S. and A.; Software — A.S.; Formal Analysis — A.S.; Investigation — A.S. and A.; Writing — Original Draft — A.S.; Writing — Review & Editing — A.S. and A.; Supervision — A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, G34

Received: 17.02.2023
Accepted: 25.05.2023
Published online: 29.05.2023

How to cite this paper: Srivastava, A., & Anand. (2023). ESG performance and firm value: The moderating role of ownership concentration. Corporate Ownership & Control, 20(3), 169–179. https://doi.org/10.22495/cocv20i3art11