The impact of ESG on financial performance: a revisit with a regression discontinuity approach
Abstract This study revisits the question of “whether firms are doing well by doing good?”. We examine shareholders-sponsored corporate socially responsible (CSR) proposals related to Environmental, Social, and Governance (ESG) that are voted to pass or fail by a small margin. The adoption of those...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Springer
2022-08-01
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| Series: | Carbon Neutrality |
| Subjects: | |
| Online Access: | https://doi.org/10.1007/s43979-022-00025-5 |
| _version_ | 1817999012478844928 |
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| author | Ziwei Xu Wenxuan Hou Brian G. M. Main Rong Ding |
| author_facet | Ziwei Xu Wenxuan Hou Brian G. M. Main Rong Ding |
| author_sort | Ziwei Xu |
| collection | DOAJ |
| description | Abstract This study revisits the question of “whether firms are doing well by doing good?”. We examine shareholders-sponsored corporate socially responsible (CSR) proposals related to Environmental, Social, and Governance (ESG) that are voted to pass or fail by a small margin. The adoption of those “close call” proposals is regarded as equivalent to a random assignment of CSR policies and, therefore, provides a quasi-experimental setting to capture the causal influence of CSR on firm performance. We apply the regression discontinuity design (RDD) and find that CSR proposals’ passage leads to a significant positive abnormal return on the voting day. The results are robust with both parametric and nonparametric approaches of RDD and different polynomial orders. However, we fail to identify a significant change in financial performance in the long-term. One possible reason is that passing a CSR proposal could be symbolic, rather than substantial. |
| first_indexed | 2024-04-14T03:02:11Z |
| format | Article |
| id | doaj.art-0ed7be879d474c59a03c1792e02f7ae4 |
| institution | Directory Open Access Journal |
| issn | 2731-3948 |
| language | English |
| last_indexed | 2024-04-14T03:02:11Z |
| publishDate | 2022-08-01 |
| publisher | Springer |
| record_format | Article |
| series | Carbon Neutrality |
| spelling | doaj.art-0ed7be879d474c59a03c1792e02f7ae42022-12-22T02:15:52ZengSpringerCarbon Neutrality2731-39482022-08-011111910.1007/s43979-022-00025-5The impact of ESG on financial performance: a revisit with a regression discontinuity approachZiwei Xu0Wenxuan Hou1Brian G. M. Main2Rong Ding3Edinburgh University Business SchoolEdinburgh University Business SchoolEdinburgh University Business SchoolNeoma Business School, Department of Accounting, Control and Legal affairsAbstract This study revisits the question of “whether firms are doing well by doing good?”. We examine shareholders-sponsored corporate socially responsible (CSR) proposals related to Environmental, Social, and Governance (ESG) that are voted to pass or fail by a small margin. The adoption of those “close call” proposals is regarded as equivalent to a random assignment of CSR policies and, therefore, provides a quasi-experimental setting to capture the causal influence of CSR on firm performance. We apply the regression discontinuity design (RDD) and find that CSR proposals’ passage leads to a significant positive abnormal return on the voting day. The results are robust with both parametric and nonparametric approaches of RDD and different polynomial orders. However, we fail to identify a significant change in financial performance in the long-term. One possible reason is that passing a CSR proposal could be symbolic, rather than substantial.https://doi.org/10.1007/s43979-022-00025-5Corporate social responsibilityRegression discontinuityFinancial performance |
| spellingShingle | Ziwei Xu Wenxuan Hou Brian G. M. Main Rong Ding The impact of ESG on financial performance: a revisit with a regression discontinuity approach Carbon Neutrality Corporate social responsibility Regression discontinuity Financial performance |
| title | The impact of ESG on financial performance: a revisit with a regression discontinuity approach |
| title_full | The impact of ESG on financial performance: a revisit with a regression discontinuity approach |
| title_fullStr | The impact of ESG on financial performance: a revisit with a regression discontinuity approach |
| title_full_unstemmed | The impact of ESG on financial performance: a revisit with a regression discontinuity approach |
| title_short | The impact of ESG on financial performance: a revisit with a regression discontinuity approach |
| title_sort | impact of esg on financial performance a revisit with a regression discontinuity approach |
| topic | Corporate social responsibility Regression discontinuity Financial performance |
| url | https://doi.org/10.1007/s43979-022-00025-5 |
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