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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Yulia Yurchenko
Environmental, Social and Governance Factors and Corporate Financial Performance
Strategic Corporate Finance
(Master’s programme)
7
2019
This research analyzes the relationship between environmental, social and governance (ESG) factors and firm value. While many articles attempted to explore the relationship between ESG performance and financial performance, the simultaneous influence of ESG performance and disclosure has been largely undiscovered. According to the results, stakeholders account for both ESG performance and ESG disclosure while valuing the company. ESG strengths positively impact valuation, while ESG concerns impair the overall market value. ESG disclosure taken solely also negatively impacts firm value. Together with ESG strengths, higher ESG reporting weakens the beneficial effect of firm’s strengths on firm valuation, while ESG disclosure together with ESG concerns mitigates negative effects on firm value. The mitigating effect of ESG disclosure may signal that investors value ESG efforts positively when a company struggles with environmental, social or governance challenges, and vice versa, when a company performs well in terms of ESG, prioritizing ESG issues might negatively influence firm value, probably because investors may perceive wide ESG agenda to be a sign of inefficient spending.

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