ESG score and corporate financial performance in controversial industries
| Název práce v češtině: | ESG skóre a finanční výkonnost společností v kontroverzních odvětvích |
|---|---|
| Název v anglickém jazyce: | ESG score and corporate financial performance in controversial industries |
| Klíčová slova: | ESG skóre, finanční výkonost, kontroverzní odvětví, panelová VAR, Grangerova kausalita |
| Klíčová slova anglicky: | ESG score, financial performance, controversial industry, panel VAR, Granger causality |
| Akademický rok vypsání: | 2022/2023 |
| Typ práce: | bakalářská práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | PhDr. Jiří Kukačka, Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 12.06.2023 |
| Datum zadání: | 12.06.2023 |
| Datum a čas obhajoby: | 10.06.2024 09:00 |
| Místo konání obhajoby: | Opletalova, O105, místnost č. 105 |
| Datum odevzdání elektronické podoby: | 30.04.2024 |
| Datum proběhlé obhajoby: | 10.06.2024 |
| Oponenti: | Mgr. Jan Šíla, M.Sc. |
| Seznam odborné literatury |
| Cayón, E., & Gutierrez, J. C. (2021). Sin stocks and ESG scores: Does the nature of your business really matter? Journal of International Studies, 14(3), 114-123. https://doi.org/10.14254/2071-8330.2021/14-3/7
Dorfleitner, G., Kreuzer, C. & Sparrer, C. ESG controversies and controversial ESG: about silent saints and small sinners. J Asset Manag 21, 393–412 (2020). https://doi.org/10.1057/s41260-020-00178-x Havlinova, A., Kukacka, J. Corporate Social Responsibility and Stock Prices After the Financial Crisis: The Role of Strategic CSR Activities. J Bus Ethics 182, 223–242 (2023). https://doi.org/10.1007/s10551-021-04935-9 Cai, Y., Jo, H. & Pan, C. Doing Well While Doing Bad? CSR in Controversial Industry Sectors. J Bus Ethics 108, 467–480 (2012). https://doi.org/10.1007/s10551-011-1103-7 Paradis, G.; Schiehll, E., ESG Outcasts: Study of the ESG, Performance of Sin Stocks. Sustainability 2021, 13, 9556. https://doi.org/10.3390/su13179556 Jeroen Derwall, Kees Koedijk, Jenke Ter Horst, A tale of values-driven and profit-seeking social investors, Journal of Banking & Finance,Volume 35, Issue 8, 2011, Pages 2137-2147, ISSN 0378-4266, https://doi.org/10.1016/j.jbankfin.2011.01.009. Gregory, A., Tharyan, R. & Whittaker, J. Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth. J Bus Ethics 124, 633–657 (2014). https://doi.org/10.1007/s10551-013-1898-5 Gunnar Friede, Timo Busch & Alexander Bassen (2015) ESG and financial performance: aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment, 5:4, 210-233, https://doi.org/10.1080/20430795.2015.1118917 Atz, Ulrich and Van Holt, Tracy and Liu, Zongyuan Zoe and Bruno, Christopher, Does Sustainability Generate Better Financial Performance? Review, Meta-analysis, and Propositions (July 22, 2022). Journal of Sustainable Finance and Investment, http://dx.doi.org/10.2139/ssrn.3708495 Alexandre Sanches Garcia, Wesley Mendes-Da-Silva, Renato J. Orsato, Sensitive industries produce better ESG performance: Evidence from emerging markets, Journal of Cleaner Production, Volume 150, 2017, ISSN 0959-6526, https://doi.org/10.1016/j.jclepro.2017.02.180. |
| Předběžná náplň práce v anglickém jazyce |
| Research question and motivation
In recent years, there has been a growing trend of discussions surrounding global environmental issues, such as escalating temperature, the alarming rate of species extinction, and shifting weather patterns. This awareness has undoubtedly pushed many individuals to adopt a different mindset and to explore more sustainable lifestyles, reducing consumption, and minimizing their carbon footprint. Moreover, investors have followed the trend, leading to the emergence of socially responsible investing (SRI), the driver of so-called ethical investing. The SRI is often based on the concept of negative screening which involves the exclusion of industries mainly referred to as controversial, such as tobacco, gambling, and alcohol. In contrast, positive screening takes an opposite perspective and focuses on industries that are the leading ships in environmental responsibility and sustainability, such as those involved in renewable energy or other environmentally friendly initiatives. Consequently, numerous researchers have studied the relationship between the company's corporate social responsibility (CSR) of the company and their corporate financial performance (CFP). The findings of these studies are heterogeneous, a comprehensive summary can be found in the work of Dorfleitner (2020). However, the meta-analyses conducted by Friede et al. (2015), Atz et al. (2023) found that the vast majority of different studies have reported positive relationships. To address the need for a measurable metric for CSR activities, the introduction of the ESG score has been instrumental. It covers more aspects (environmental, social, and governance factors) and provides insights into a company’s engagement in these three dimensions. Various methodologies exist for calculating this new key indicator and big rating institutions differ from each other slightly. Furthermore, accounting standard setters are actively discussing the precise rules and principles for firms to tackle this new non-financial statement. Since ESG reporting is still a new emerging area, it can be a subject of potential managerial manipulation. Especially, companies operating in controversial industries might benefit more from the positive relationship between CSR and CFP. These companies may attempt to legitimize their business practices which are often considered socially irresponsible, harmful, or unethical. The thesis examines the relationship between the ESG score of companies operating in controversial industries and their financial performance. A comparative analysis is conducted by comparing companies that are regarded as socially responsible, representing their complete opposites. Contribution The aim is to contribute to the existing body of research on the relationship between the CFP and CRS by incorporating the combined ESG score provided by the independent rating provider Thomson Reuters. The thesis tries to answer whether changes in the ESG scores yield similar effects in controversial, neutral, and SRI-friendly industries. In other words, it closely examines the relationship between ESG score and CFP by comparing companies using market-based performance measures. Do firms with high ESG scores outperform companies with lower scores, particularly when comparing different industries? Methodology Thomson Reuters provides data about the ESG scores of firms. Specifically, the ESGC score is utilized, which considers any controversies that may have influenced a company during a certain fiscal period. Additionally, the score is adjusted based on the size of the company. The dataset of companies is divided into three groups based on their industries (controversial, neutral, SRI-friendly). The analysis also incorporates the concept of negative and positive screening. Outline 1. Introduction - Motivation - CSR-CFP - ESG score 2. Literature review - History of CSR - Heterogenous findings 3. Methodology - Hypothesis - Stock market vs accounting-based measures - Independent variables 4. Data - Calculation of ESG and ESGC score 5. Estimation 6. Results - Interpretation 7. Conclusion - Main findings - Recapitulation and Evaluation |