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The Relationship Between ESG Rating and Firm Value—Evidence from Companies Listed on Polish Capital Market in the WIG-ESG Index Cover

The Relationship Between ESG Rating and Firm Value—Evidence from Companies Listed on Polish Capital Market in the WIG-ESG Index

Central European Economic Journal
Volume 11 (2024): Issue 58 (January 2024)
By: Magdalena Mikołajek-Gocejna  
Open Access
|Apr 2024

Figures & Tables

Correlations matrix

VariableTOBIN.S q (mv/bv)ESGRERSRGRSIZELEVBETA
TOBIN.S q (mv/bv)1−0.3699*−0.2696−0.3365*−0.1685−0.5464*−0.0444−0.1846
ESGR−0.3699*10.7872*0.8907*0.6403*0.4831*0.4639*0.2736
ER−0.26960.7872*10.6921*0.28650.4624*0.3834*0.3136
SR−0.3365*0.8907*0.692129*10.29810.4358*0.4972*0.2321
GR−0.16850.6403*0.2864990.298110.26960.19320.1795
SIZE−0.5464*0.4831*0.462419*0.4358*0.269610.4967*0.3549*
LEV−0.04440.4639*0.383427*0.4972*0.19320.4967*10.2653
BETA−0.18460.27360.3135680.23210.17950.3549*0.26531

Regression results for TOBIN’s Q (mv/bv)

Coef. b* (Std. Err.)Coef. b (Std. Err.)
Intercept 23.7390*** (6.0057)
EmR−0.2303 (0.3100)−0.0371 (0.04992)
RR−0.1886 (0.4306)−0.0288 (0.0659)
IR0.2981 (0.1940)0.0304 (0.0198)
HRR0.1056 (0.2115)0.0119 (0.0239)
PRR−0.2998 (0.2204)−0.0379 (0.0278)
WR0.1161 (0.2649)0.0169 (0.0386)
CR−0.0945 (0.2188)−0.0116 (0.0269)
MR−0.1015 (0.1802)−0.0117 (0.0209)
ShR−0.0140 (0.1897)−0.0016 (0.0211)
CSRR0.0567 (0.2153)0.0068 (0.0258)
SIZE−0.5665*** (0.2195)−1.0799*** (0.4184)
LEV0.2456 (0.2460)3.5099 (3.5157)
BETA−0.0724 (0.1549)−1.6445 (3.5183)
N3636
F test2.2594*2.2594*
R20.57170.5717

Literature on relationship between firm value and ESGR

AuthorsUsed ESGRFirm value/performance measurePeriodCountryResearch findings
Chouaibi et al. (2022a)Environmental disclosure (ED) practiced by firms listed on the ESG indexTobin’s Q2005–2019InternationalPositive significant
Chouaibi et al. (2022b)Measure developed by ASSET4 to measure the degree of green innovationmarket-to-book value (MTBV), return on assets (ROA), asset turnover (ATO), return on equity (ROE) and Tobin’s Q (TOBINQ)2005–2019UK and GermanyPositive significant
Abdi et al. (2022)Participation in social, environmental and governance activitiesTobin’s Q2009–2019InternationalPositive significant
Rossi et. al. (2021)CSR practicesTobin’s Q (TOBINQ), return on assets (ROA), return on equity (ROE), and market-to-book value (MTBV)2015–2019EuropePositive significant
Zhao et al. (2018)ESG performance indexROCE as financial performance indicator & Debt to Equity ratio2016ChinaPositive significant
Peris (2010)ESGR criteria Domini 400 Social Index (DSI)Market value1991–1996USAPositive significant
Fatemi et al. (2017)ESG disclosureTobin’s Q2006–2011USAPositive significant
Yoon et al. (2018)CSR activitiesStock price2005–2010KoreaPositive significant
Dalal and Thaker (2019)Sustainability ratings by NSE 100 and indicesROA2015–2017IndiaPositive significant
Giannopoulos et al. (2022)ESG initiativesTobin’s Q2010–2019NorwayPositive significant
Xie et al. (2019)Bloomberg ESG disclosure scoreCorporate efficiency (Revenue earned, ROA)2015internationalPositive significant
Bhaskaran, et al. (2020)ESG activitiesTobin’s Q2014–2018internationalPositive significant
Chairani and Siregar (2021)ESG performanceMarket value2014–2018Indonesia, Malaysia, Philippines, Singapore and ThailandPositive significant
Naeem and Ullah (2022)Thomson Reuters Asset4 ESG indexTobin’s Q2010–2019Emerging countriesPositive significant
Li et al. (2018)ESG disclosureTobin’s Q2002–2018UKPositive significant
Ahmad et al. (2021)ESG disclosureMarket value2002–2018UKPositive significant
Bramer et al. (2005)ESG indicators: environment, employment and community activitiesStock returns UKNegative significant
Marsat and Williams (2011)MSCI ESGRsTobin’s Q2005–2009MSCINegative significant
Velte (2017)ESG performance Asset4 database of Thomson ReutersTobin’s Q2010–2014GermanyNegative significant
Landi and Sciarelli (2019)ESG assessment: Standard ethics agency on FTSE MIB’s companiesStock returns2002–2015ItalyNegative significant
Garcia et al. (2020)ESG performance Thomson Reuters ASSET4DCF2007–2014Emerging countriesNegative significant
Duque-Grisales and Aguilera-Caracuel (2019)ESG score Asset4 database of Thomson ReutersTobin’s Q2011–2015Brazil, Chile, Colombia, Mexico and PeruNegative significant
Nollet et al. (2016)Bloomberg’s Environmental Social Governance (ESG)Return on capital2007–2011USAmixed
Atan et al. (2018)ESG activitiesTobin’s Q2011–2013Malaysiamixed
Lopez-de-Silanes et al. (2020)Sustainalytics ESGTobin’s Q2015–2018internationalmixed
Saygili et al. (2021)ESG scores, according to Borsa Istanbul Corporate Governance IndexTobin’s Q2007–2017Turkeymixed
Behl et al. (2022)ESG disclosureTobin’s Q2016–2019Indiamixed
Dincă et al. (2022)Sustainalytics’s ESGRsTobin’s Q2015–2020internationalmixed
Aydoğmuş et al. (2022)Refinitiv ESGTobin’s Q2013–2021Internationalmixed

ESG themes covered in each category by ESG score Refinitive

PillarsCategoriesThemes
EnvironmentEmission

  • Emissions

  • Waste

  • Biodiversity

  • Environmental management systems

Resource use

  • Water

  • Energy

  • Sustainable packaging

  • Environmental supply chain

Innovations

  • Product innovation

  • Green revenues, research and development (R&D) and capital expenditures (Capex)

SocialCommunityEqually important to all industry groups, hence a median weight of five is assigned to all
Human rightsHuman rights
Product responsibility

  • Responsible marketing

  • Product quality

  • Data privacy

Workforce

  • Diversity and inclusion

  • Career development and training

  • Working conditions

  • Health and safety

GovernanceCRS strategy

  • CSR strategy

  • ESG reporting and transparency

Management

  • Structure (independence, diversity, committees)

  • Compensation

Shareholders

  • Shareholder rights

  • Takeover defenses

Descriptive statistics

VariableDescriptive Statistics
Valid NMeanMinimumMaximumStd. Dev.
Panel A: company value
TOBIN’s Q (mv/bv)362.5780.15016.3903.366
Panel B: ESGRs
  ESGR3657.36117.00096.00016.716
  ER3654.4447.00095.00021.720
  SR3659.8338.00096.00019.935
  GR3655.83315.00094.00021.331
Panel C: control variables
  SIZE3616.91713.02419.9151.766
  LEV360.6240.0880.9500.236
BETA360.3220.0350.6210.148

Definition of variables

Dependent variableTobin’s Q (TQi)Market value to book value of assets (natural logarithm) for i-company;
Independent variablesESGRiESG provided by Refinitive for i-company;
ERiER provided by Refinitive for i-company;
SRiSR provided by Refinitive for i-company;
GRiGR provided by Refinitive for i-company;
Control variablesSIZEiSize of the company measured by natural logarithm of total assets for i-company;
LEViLeverage ratio measured by total debt/total assets (unsystematic risk) for i-company;
BETAiSystematic risk of company measured according to CAPM for i-company;
DOI: https://doi.org/10.2478/ceej-2024-0011 | Journal eISSN: 2543-6821 | Journal ISSN: 2544-9001
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Language: English
Page range: 141 - 158
Published on: Apr 19, 2024
Published by: Faculty of Economic Sciences, University of Warsaw
In partnership with: Paradigm Publishing Services
Publication frequency: 1 issue per year
Keywords:
ESG rating,
ESG,
firm value,
Tobin‘s Q,
environment rating,
social rating,
governance rating
Related subjects:
Business and economics,
Political economics,
Economic theory, systems and structures,
Microeconomics,
Macroeconomics,
Economic policy

© 2024 Magdalena Mikołajek-Gocejna, published by Faculty of Economic Sciences, University of Warsaw
This work is licensed under the Creative Commons Attribution 4.0 License.

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