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Relationship between ESG and Financial Performance of Companies in the Central and Eastern European Region

Author

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  • Siwiec Karolina

    (University of Warsaw, Faculty of Management; Szturmowa 1/3, 02-678 Warsaw, Poland)

  • Karkowska Renata

    (University of Warsaw, Faculty of Management; Szturmowa 1/3, 02-678 Warsaw, Poland)

Abstract

Observable climate change and an increase in the frequency of extreme climate events undoubtedly pose challenges for society and business operations. The changes being implemented in sustainability efforts are a response to these challenges. However, the question is how these measures affect companies‘ financial performance. The study aims to verify the relationship between the reporting of sustainability scores related to three aspects: environmental, social, and corporate governance (ESG). It focuses on the financial performance of companies in the Central and Eastern Europe (CEE) region in 2017–2021. The study will use panel regression and cross-sectional analysis. The results indicate a positive relationship between the disclosure of ESG activities and the financial performance of companies as measured by ROA. It was also observed that for companies operating in the financial sector, the correlation is greater, compared to companies operating in other sectors. This study contributes to the ongoing debate on the environment, society, and governance in the economy.

Suggested Citation

  • Siwiec Karolina & Karkowska Renata, 2024. "Relationship between ESG and Financial Performance of Companies in the Central and Eastern European Region," Central European Economic Journal, Sciendo, vol. 11(58), pages 178-199, January.
    • Handle: RePEc:vrs:ceuecj:v:11:y:2024:i:58:p:178-199:n:13
    DOI: 10.2478/ceej-2024-0013
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    References listed on IDEAS

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    1. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    2. Heli Wang & Jaepil Choi & Jiatao Li, 2008. "Too Little or Too Much? Untangling the Relationship Between Corporate Philanthropy and Firm Financial Performance," Organization Science, INFORMS, vol. 19(1), pages 143-159, February.
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    Cited by:

    1. Sónia Monteiro & Vanda Roque & Márcia Faria, 2024. "Does Sustainability Reporting Impact Financial Performance? Evidence from the Largest Portuguese Companies," Sustainability, MDPI, vol. 16(15), pages 1-11, July.

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    More about this item

    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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