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The Effect of Environmental, Social, Governance, and Controversies on Firms’ Value: Evidence from Asia

In: Advanced Issues in the Economics of Emerging Markets

Author

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  • Anna Melinda
  • Ratna Wardhani

Abstract

With the increasing understanding of stakeholders on sustainability aspects for the business, companies are nowadays paying more attention to environmental and social issues. This study aims to examine the relationship between Environmental, Social, Governance (ESG) Index and firms’ value. Moreover, this study also examines how the controversy score influences the company’s value. The authors employ a dataset of 1.356 companies from 22 countries in Asia which representing the Asian market from 2014 to 2018. This study shows that ESG index score and controversy score are statistically significant, affecting the firms’ value, measured by Tobin’s Q. From the individual tests, the findings of this study indicate that ESG-environmental, ESG-social, and ESG-governance, individually affect the firms’ value. This study suggests that providing disclosure on ESG aspects is essential, not only to increase company value but also to show the company resilience and sustainability. On the other hand, ESG controversy score surprisingly indicates a positive relationship with the company value. The result implies that controversies provide a positive signal to the investor because controversies could provide a signal to the public of companies’ willingness to have transparency and accountability.

Suggested Citation

  • Anna Melinda & Ratna Wardhani, 2020. "The Effect of Environmental, Social, Governance, and Controversies on Firms’ Value: Evidence from Asia," International Symposia in Economic Theory and Econometrics, in: Advanced Issues in the Economics of Emerging Markets, volume 27, pages 147-173, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620200000027011
    DOI: 10.1108/S1571-038620200000027011
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    Citations

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    Cited by:

    1. Komath, Muhammed Aslam Chelery & Doğan, Murat & Sayılır, Özlem, 2023. "Impact of corporate governance and related controversies on the market value of banks," Research in International Business and Finance, Elsevier, vol. 65(C).

    More about this item

    Keywords

    Environmental; Social; Governance; ESG controversies; firm value; sustainability; G34; M4; O16;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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