What is it about?
This study examines the association between firms’ ESG reputational risk and financial performance under the EU regulatory policy changes and the COVID-19 period.
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Why is it important?
This publication scrutinizes a panel of 1,816 European listed firms across the 2007 to 2021 timeframe. It illuminates compelling evidence that companies with lower ESG (Environmental, Social, and Governance) reputational risk encounter reduced information asymmetry, encounter fewer financial constraints, and exhibit superior performance. To establish causality, a quasi-natural experiment is utilized, specifically focusing on the influence of the 2014/95/EU directive on non-financial disclosure and the exogenous shock of COVID-19.
Perspectives
This publication's significance lies in its thorough examination of 1,816 European listed firms over a 14-year period, spotlighting the pivotal role of Environmental, Social, and Governance (ESG) reputational risk. It compellingly showcases how lower ESG risks correlate with improved corporate performance, reduced financial constraints, and diminished information asymmetry. Moreover, the study employs a quasi-natural experiment to establish causal relationships, particularly delving into the impact of the 2014/95/EU directive on non-financial disclosure and the unforeseen effects of COVID-19. These findings hold critical implications for stakeholders, offering insights into policy decisions, business strategies, and the interconnected dynamics between ESG considerations and firm performance
Dr. Dimitrios Konstantios
Alba Graduate Business School, The American College of Greece
Read the Original
This page is a summary of: Firms’ sustainability, financial performance, and regulatory dynamics: Evidence from European firms, Journal of International Money and Finance, March 2023, Elsevier,
DOI: 10.1016/j.jimonfin.2022.102785.
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