Revisiting the impact of ESG on financial performance: Empirical evidence from the Italian Stock Exchange

Titolo Rivista FINANCIAL REPORTING
Autori/Curatori Michele Bertoni, Paolo Candio, Paola Rossi
Anno di pubblicazione 2024 Fascicolo 2024/2
Lingua Inglese Numero pagine 29 P. 163-191 Dimensione file 369 KB
DOI 10.3280/FR2024-002007
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Purpose: This paper re-examines the overall and pillar-level impact of the envi-ronmental, social, and governance (ESG) performance on the financial perfor-mance of companies listed in the Italian Stock Exchange market. By using the seminal paper by Velte (2017) – which focused on the German context – as the base comparison, we also test the moderating role of a firm’s characteristics on that association. Design/methodology/approach: We analyze data on companies listed in the Ital-ian Stock Exchange from 2010 to 2022, sourced from the Refinitiv Eikon plat-form, for a total of 650 firm-year observations. Correlation and regression anal-yses are conducted to evaluate the link between ESG and a series of financial per-formance indicators including the return on assets (ROA) and Tobin’s Q ratios. Findings: While neutral results are found for ROA, this study reveals that ESG per-formance has a positive impact on Tobin’s Q, in contrast to what was found by Velte (2017). However, we confirm that the governance pillar exerts the most sig-nificant effect on Tobin’s Q. Furthermore, the analysis of the firms’ characteristics as moderating factors reveals that the risk and financial leverage of a company negatively influence the relationship between ESG performance and financial per-formance. Originality/value: This study contributes to the empirical literature on the associ-ation between ESG performance and financial performance by re-examining the study by Velte (2017) for a different period and different context. Moreover, we test for the moderating effect of the firms’ characteristics on the relationship be-tween ESG and financial performance.

Keywords:re-examination, ESG score, financial performance, Italy, corporate social responsibility, moderating factors

Jel codes:M41, M14, G10

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Michele Bertoni, Paolo Candio, Paola Rossi, Revisiting the impact of ESG on financial performance: Empirical evidence from the Italian Stock Exchange in "FINANCIAL REPORTING" 2/2024, pp 163-191, DOI: 10.3280/FR2024-002007