The impact of ESG on financial performance: a revisit with a regression discontinuity approach

Ziwei Xu1, Wenxuan Hou2,1, Brian G. M. Main1, Rong Ding3
1Edinburgh University Business School, Edinburgh, UK
2School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai, China
3Neoma Business School, Department of Accounting, Control and Legal affairs, Mont-Saint-Aignan, France

Tóm tắt

AbstractThis 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.

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