IDEAS home Printed from https://ideas.repec.org/a/pkp/ijomas/v13y2024i2p151-168id3622.html
   My bibliography  Save this article

The effect of ESG activities on financial performance: The moderating effect of debt ratio

Author

Listed:
  • Joohee Han
  • Sung Jun Jo

Abstract

This study examined the effect of environmental, social, and governance (ESG) management on corporate performance. We collected sample data on KOSPI-listed companies in 2021 using ESG ratings released by the Korea Corporate Governance Service. The system of ratings was segmented into three distinct categories for the purpose of analysis, namely the environment, society, and governance. An empirical investigation was conducted to determine how ESG ratings and separate ratings (E, S, and G ratings) affect financial performance. We also examined the moderating impact of the debt ratio on the association between ESG ratings and financial performance to enhance the explanatory strength of this relationship. The results indicated that ESG ratings and E and S ratings are positively related to financial performance, and the debt ratio has a negative moderating effect on the link between ESG ratings related to environmental aspects and financial performance. The findings indicate that firms need ESG management to improve financial performance. ESG ratings can be utilized to show the effects of environment-focused management, sustainability, and CSR initiatives on financial performance. Additionally, the moderation effect of the debt ratio in this study clearly demonstrates the connection between ESG rating and financial performance. Our analysis also demonstrates that organizations with high debt ratios and a lack of resources to pursue ESG are unable to devote a significant amount of time and resources to ESG management.

Suggested Citation

  • Joohee Han & Sung Jun Jo, 2024. "The effect of ESG activities on financial performance: The moderating effect of debt ratio," International Journal of Management and Sustainability, Conscientia Beam, vol. 13(2), pages 151-168.
    • Handle: RePEc:pkp:ijomas:v:13:y:2024:i:2:p:151-168:id:3622
    as

    Download full text from publisher

    File URL: https://archive.conscientiabeam.com/index.php/11/article/view/3622/7909
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pkp:ijomas:v:13:y:2024:i:2:p:151-168:id:3622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dim Michael (email available below). General contact details of provider: https://archive.conscientiabeam.com/index.php/11/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.