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Value Relevance of ESG Scores: Evidence from European Stock Exchange Markets

Author

Listed:
  • Claudia Mihaela Rapan

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Viorel-Costin Banta

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Andreia Manea

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Mamoun Walid Aridah

    (Bucharest University of Economic Studies, Bucharest, Romania)

Abstract

The research is analyzing the value relevance of other comprehensive income and the environmental, social and governance (ESG) scores in regard to the share price in Europe (Italy, France, Germany and Spain). As part of the international and continuous developing capital markets, the disclosure of comparable financial information, based on global and quality standards, such as International Financial Reporting Standards (IFRS), is a key aspect for capital providers (investors, banks and other creditors) in making their investment decisions or management risk assessment. Depending on the category of financial information users, the relevance of the information provided by comprehensive income and other comprehensive income can be perceived differently, and thus managers are interested in overall performance, while investors are interested in return on investment and creditors in the company's performance from a solvency perspective. In the last years, the evolution of capital markets proved that besides the companies' performance respectively financial information provided, an important role in stakeholders' decisions is performed by the nonfinancial information, respectively ESG performance. The association between ESG, other comprehensive income, and share price was analyzed through the Ohlson price model, considering the impact of financial and non-financial information. The sample analyzed is through a period of 5 years 2017-2021 and the data was collected through Thomson Reuter's Eikon Database. The research has concluded that there is a positive and significant influence of main ESG scores on the share price but not in the case of other comprehensive income. And the value relevance of ESG scores is reflected on the investors' behavior and their vision over sustainable investments.

Suggested Citation

  • Claudia Mihaela Rapan & Viorel-Costin Banta & Andreia Manea & Mamoun Walid Aridah, 2022. "Value Relevance of ESG Scores: Evidence from European Stock Exchange Markets," Oblik i finansi, Institute of Accounting and Finance, issue 2, pages 68-75, June.
    • Handle: RePEc:iaf:journl:y:2022:i:2:p:68-75
    DOI: 10.33146/2307-9878-2022-2(96)-68-75
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    References listed on IDEAS

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    1. Bohyun Yoon & Jeong Hwan Lee & Ryan Byun, 2018. "Does ESG Performance Enhance Firm Value? Evidence from Korea," Sustainability, MDPI, vol. 10(10), pages 1-18, October.
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    Cited by:

    1. Olakunle Oloruntobi & Adel Gohari & Safizahanin Mokhtar & Kasypi Mokhtar & Siti Marsila Mhd. Ruslan, 2025. "Comparative analysis of long-term returns, financial considerations, and measurement challenges in future ESG investing," Journal of Asset Management, Palgrave Macmillan, vol. 26(3), pages 271-297, May.

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    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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