Do Environmental, Social, and Governance (ESG) Factors Matter? Analyzing the Relationships between Firm Characteristics and ESG Scores.

16 Pages Posted: 5 Sep 2024 Last revised: 29 Oct 2024

See all articles by C. N. V. Krishnan

C. N. V. Krishnan

Case Western Reserve University - Department of Banking & Finance

Jiemin Yang

Case Western Reserve University

Xiyao Tan

Case Western Reserve University - Weatherhead School of Management

Date Written: October 14, 2024

Abstract

We used three different databases that cover different years from 2006 through 2023 that provide different insights into the associations of firm features with their E, S, and G scores, as well as the composite ESG score. We find that large market capitalization firms are associated with higher ESG and environmental scores as well as with ESG‐related strengths. These associations likely stem from the increased scrutiny and expectations from investors, regulators, and the public for large‐ cap firms. However, we find that changes in ESG scores have no significant associations with changes in basic firm characteristics—market cap, growth options, or profitability. That is, changes in ESG scores over time do not seem to significantly enhance or alter these basic features of a firm.

Keywords: ESG, Environmental, Social, Governance, Market capitalization, Book-to-Market ratio, Profitability, ESG Strengths, ESG Concerns

Suggested Citation

Krishnan, C. N. V. and Yang, Jiemin and Tan, Xiyao, Do Environmental, Social, and Governance (ESG) Factors Matter? Analyzing the Relationships between Firm Characteristics and ESG Scores. (October 14, 2024). Available at SSRN: https://ssrn.com/abstract=4927995 or http://dx.doi.org/10.2139/ssrn.4927995

C. N. V. Krishnan (Contact Author)

Case Western Reserve University - Department of Banking & Finance ( email )

11119 Bellflower Rd
PBL 363
Cleveland, OH 44106-7235
United States
216-368-2116 (Phone)

HOME PAGE: http://weatherhead.case.edu/faculty/c-n-v-krishnan

Jiemin Yang

Case Western Reserve University ( email )

Xiyao Tan

Case Western Reserve University - Weatherhead School of Management ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
2165514897 (Phone)

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