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The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector

Author

Listed:
  • Pompei MITITEAN

    (Bucharest University of Economic Studies)

  • Nicoleta-Florina SĂRMAȘ

    (Bucharest University of Economic Studies)

Abstract

This article examines the relationship between corporate sustainability, as measured by the combined environmental, social and governance (ESG) and individual scores, and corporate performance of companies operating in the European energy sector. Due to the new EU regulation, companies must adopt strategies regarding environmental, social and governance activities, elaborating an integrated report that shows investors how they are involved in social issues and environmental concerns. This study is based on a quantitative research method which involves using an econometric model and running a multiple linear regression. The data used was collected from the Thomson Reuters Eikon database and covers the period 2017-2021. The identified results are mixed. There is a positive, but statistically insignificant relationship between ESG, ENV, SOC and ROA, while there is a negative and significant relationship between GOV and ROA at the 0.05 level. ENV and SOC scores have a strong negative and significant impact on ROE, and ESG and GOV do not show a significant relationship with it. Additionally, ESG has a significant positive impact on Tobin’s Q ratio, and ENV and SOC have a significant positive impact on it. This research can help investors and other stakeholders have an overview of the energy sector in which they can direct their investment strategies.

Suggested Citation

  • Pompei MITITEAN & Nicoleta-Florina SĂRMAȘ, 2023. "The Relationship Between Sustainability Reporting and Corporate Performance. Evidence from the European Energy Sector," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(7), pages 49-59, July.
    • Handle: RePEc:ahd:journl:v:4:y:2023:i:7:p:49-59
    DOI: 10.37945/cbr.2023.07.06
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    References listed on IDEAS

    as
    1. Pompei Mititean, 2022. "The Impact Of Corporate Governance Characteristics On Companies’ Financial Performance: Evidence From Romania," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(233), pages 113-134, April – J.
    2. Abhishek Behl & P. S. Raghu Kumari & Harnesh Makhija & Dipasha Sharma, 2022. "Exploring the relationship of ESG score and firm value using cross-lagged panel analyses: case of the Indian energy sector," Annals of Operations Research, Springer, vol. 313(1), pages 231-256, June.
    3. Changhong Zhao & Yu Guo & Jiahai Yuan & Mengya Wu & Daiyu Li & Yiou Zhou & Jiangang Kang, 2018. "ESG and Corporate Financial Performance: Empirical Evidence from China’s Listed Power Generation Companies," Sustainability, MDPI, vol. 10(8), pages 1-18, July.
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    5. Michał Baran & Aneta Kuźniarska & Zbigniew J. Makieła & Anna Sławik & Magdalena M. Stuss, 2022. "Does ESG Reporting Relate to Corporate Financial Performance in the Context of the Energy Sector Transformation? Evidence from Poland," Energies, MDPI, vol. 15(2), pages 1-22, January.
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    More about this item

    Keywords

    sustainability; corporate performance; environmental; social and governance factors; the energy sector;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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