IDEAS home Printed from https://ideas.repec.org/a/vrs/ejothr/v15y2025i2p267-279n1007.html

Financial Strength meets Sustainability: how Profitability and Company size elevate ESG Ratings in the Hospitality Industry

Author

Listed:
  • Bogdan Siniša

    (Faculty of tourism and hospitality management, Opatija)

  • Nikšić Radić Maja

    (Faculty of tourism and hospitality management, Opatija)

  • Gajić Anđela

    (Faculty of tourism and hospitality management, Opatija)

Abstract

Due to its significant environmental impact, intensive resource use, and growing concerns about social and governance issues, today’s hospitality industry faces increased pressure to improve its environmental, social, and governance (ESG) performance. Although financial strength is often associated with better ESG practices and higher ESG scores, little is known about how financial indicators and company size relate to ESG risk scores in the hospitality industry. The aim of this study was to examine the relationship between financial performance, company size and ESG risk for a sample of 63 publicly listed hospitality companies. ESG risk scores were obtained from Sustainalytics and combined with financial data. The results showed a strong negative correlation between ESG risk and market capitalisation, indicating that larger firms in the sample tend to report lower ESG risk. To identify which financial indicators are most closely associated with ESG risk, OLS was applied. Although the initial expectation was that higher profitability would systematically correspond to lower ESG risk, the results point to a more complex balance between asset and equity-based profitability ratios and sustainability. The results provide practical guidance for investors and other relevant stakeholders by indicating which financial metrics are most strongly associated with lower ESG risk in the hospitality industry.

Suggested Citation

  • Bogdan Siniša & Nikšić Radić Maja & Gajić Anđela, 2025. "Financial Strength meets Sustainability: how Profitability and Company size elevate ESG Ratings in the Hospitality Industry," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 15(2), pages 267-279.
    • Handle: RePEc:vrs:ejothr:v:15:y:2025:i:2:p:267-279:n:1007
    DOI: 10.2478/ejthr-2025-0019
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/ejthr-2025-0019
    Download Restriction: no
    File URL: https://libkey.io/10.2478/ejthr-2025-0019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jun-Ho Bae, 2022. "Developing ESG Evaluation Guidelines for the Tourism Sector: With a Focus on the Hotel Industry," Sustainability, MDPI, vol. 14(24), pages 1-17, December.
    2. Khan, Muhammad Arif, 2022. "ESG disclosure and Firm performance: A bibliometric and meta analysis," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. 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.
    4. Beebeejaun Ambareen, 2022. "An Assessment of Compulsory Environmental Reporting by Listed Hotels in Mauritius," Journal of Tourism, Sustainability and Well-being, CinTurs - Research Centre for Tourism, Sustainability and Well-being, University of Algarve, vol. 10(4), pages 261-273.
    5. Chammy Lau & Irini Lai Fun Tang & Wilco Chan, 2021. "Waterfront Hotels’ Chillers: Energy Benchmarking and ESG Reporting," Sustainability, MDPI, vol. 13(11), pages 1-15, June.
    6. Clark, John & Mauck, Nathan & Pruitt, Stephen W., 2021. "The financial impact of COVID-19: Evidence from an event study of global hospitality firms," Research in International Business and Finance, Elsevier, vol. 58(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samta Jain & Aditya Banerjee, 2025. "The Impact of Economic Policy Uncertainty and ESG Reporting on Financial Performance of Hospitality Companies," Business Strategy and the Environment, Wiley Blackwell, vol. 34(7), pages 8649-8666, November.
    2. Piñeiro-Chousa, Juan & López-Cabarcos, M. Ángeles & Pérez-Pico, Ada M. & Caby, Jérôme, 2023. "The influence of Twitch and sustainability on the stock returns of video game companies: Before and after COVID-19," Journal of Business Research, Elsevier, vol. 157(C).
    3. Klimenko, Mikhail & Romanyuk, Kirill, 2025. "Investor perception of ESG-linked credit risk during the COVID-19 pandemic for U.S. and European firms," Finance Research Letters, Elsevier, vol. 86(PB).
    4. Remo-Diez, Nieves & Mendaña-Cuervo, Cristina & Arenas-Parra, Mar, 2023. "Exploring the asymmetric impact of sustainability reporting on financial performance in the utilities sector: A longitudinal comparative analysis," Utilities Policy, Elsevier, vol. 84(C).
    5. Liu, An-Chi & Lien, Yung-Chih & Li, Yang, 2025. "An empirical investigation of ESG dimensions and bank performance: Evidence from the COVID-19 crisis," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    6. Hoang, Thi Hong Van & Pham, Linh & Nguyen, Thanh Thi Phuong, 2023. "Does country sustainability improve firm ESG reporting transparency? The moderating role of firm industry and CSR engagement," Economic Modelling, Elsevier, vol. 125(C).
    7. Shrestha, Chaman & Andrikopoulos, Panagiotis & Park, Jin Suk, 2025. "ESG rating and financial performance in the emerging markets: The moderating effects of cross-listing and industry type," Research in International Business and Finance, Elsevier, vol. 77(PA).
    8. Chen, Lifeng & Khurram, Muhammad Usman & Gao, Yuying & Abedin, Mohammad Zoynul & Lucey, Brian, 2023. "ESG disclosure and technological innovation capabilities of the Chinese listed companies," Research in International Business and Finance, Elsevier, vol. 65(C).
    9. Staněk Gyönyör, Lucie & Horváth, Matúš, 2024. "Does ESG affect stock market dependence? An empirical exploration of S&P 1200 companies shows the divergent nature of E–S–G pillars," Research in International Business and Finance, Elsevier, vol. 69(C).
    10. Hongqiang Yan & Ashok K. Mishra & Xi Zhou, 2026. "Do All Food and Beverage Firms Benefit From Voluntary ESG Reporting? Evidence From China's Listed Companies," Agribusiness, John Wiley & Sons, Ltd., vol. 42(2), pages 623-640, April.
    11. Citterio, Alberto, 2024. "Bank failure prediction models: Review and outlook," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    12. Wen, Huwei & Liu, Yupeng & Lee, Chien-Chiang, 2024. "How ESG performance affects maturity mismatches between investment and financing: Evidence from Chinese A-share listed companies," Research in International Business and Finance, Elsevier, vol. 71(C).
    13. Marta Szczepańczyk & Paweł Nowodziński & Adam Sikorski, 2023. "ESG Strategy and Financial Aspects Using the Example of an Oil and Gas Midstream Company: The UNIMOT Group," Sustainability, MDPI, vol. 15(18), pages 1-24, September.
    14. Choi, Gahyun & Park, Kwangyeol & Yi, Eojin & Ahn, Kwangwon, 2023. "Price fairness: Clean energy stocks and the overall market," Chaos, Solitons & Fractals, Elsevier, vol. 168(C).
    15. Mohamed Rashwan & Nardin Farouk & Rania Pasha, 2025. "Can ESG Strategies Drive Firm Value Growth in the MENA Region?," Sustainability, MDPI, vol. 17(17), pages 1-30, September.
    16. Mi Sook Lee, 2024. "The relationship between green innovation and sustainable growth in Korean companies: Moderated mediation effect of ESG score by industry," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(3), pages 2797-2810, June.
    17. Willem Schramade, 2016. "Integrating ESG into valuation models and investment decisions: the value-driver adjustment approach," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(2), pages 95-111, April.
    18. van Weeren, Michelle & Bluntz, Clarence, 2025. "What makes a rating useable? Shifting epistemic practices in the ESG rating field," Accounting, Organizations and Society, Elsevier, vol. 114(C).
    19. Rami Salem & Musa Ghazwani & Waleed Alshaer, 2025. "ESG Performance–Stock Price Volatility Nexus: The Moderating Effect of Board Cultural Diversity in G20 Markets," Business Strategy and the Environment, Wiley Blackwell, vol. 34(7), pages 8172-8193, November.
    20. Florian Kiesel & Felix Lücke, 2019. "ESG in credit ratings and the impact on financial markets," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 28(3), pages 263-290, August.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:vrs:ejothr:v:15:y:2025:i:2:p:267-279:n:1007. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    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.