An analysis of the impact of the respective environmental, social and governance performances on firm value in South Africa
Date
2023-03
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
Background: There is increasing pressure on South African firms to invest in sustainable initiatives. As a result, the impact of environmental, social and governance (ESG) performance on firm value has become a significant area for research. Notwithstanding the growing importance of ESG performance, the majority of prior research has focused largely on ESG disclosure. From an integrated thinking perspective, firms are required to consider their impact on each of the E, S and G aspects of sustainable value creation. However, prior research has concentrated on combined ESG ratings, rather than disaggregating the ratings to analyse the impact of the respective environmental, social and governance pillars on firm value.
Purpose: The aim of this research report is to examine the relationship between firm value and respective environmental (E), social (S) and governance (G) performance ratings in South Africa.
Method: The study utilises ESG performance ratings from rating agencies, FTSE and Bloomberg, as well as internal and external perspectives of firm value. Data was analysed using descriptive statistics and regression analysis over the five-year period from 2018 to 2022.
Results: No relationship between E, S or G performance and firm value was statistically significant, irrespective of the measure of firm value used or the ESG rating used.
Implications: The results indicate that investors might not incorporate E, S and G performance ratings in their investment decisions. From an internal firm perspective, the results indicate that management might not incorporate E, S and G performances in their value creation decisions.
Significance: Due to the findings of the non-significant relationships between E, S and G performances and firm value, this study contributes to existing academic research as it foregrounds the need for further investigation into the value relevance of ESG performance ratings on firm value
Description
A research report submitted in partial fulfillment of the requirements for the degree of Master of Commerce in Accountancy University of the Witwatersrand, 2023
Keywords
Bloomberg ESG performance rating, Environmental performance, Firm value, FTSE ESG performance rating, Governance performance, Social performance, UCTD
Citation
Rewachanda, Saihil. (2023). An analysis of the impact of the respective environmental, social and governance performances on firm value in South Africa [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace. https://hdl.handle.net/10539/38726