| dc.description.abstract | This study explores the relationship between ESG scores and financial performance in Nordic markets, using ESG scores from Refinitiv and MSCI. We examine the impact of ESG on performance measures such as Revenue change, ROA, ROE, Stock Return, and WACC. The results indicate a significant positive relationship between ESG combined score and ROA in both Refinitiv and MSCI datasets, as well as a positive but not significant relationship of ESG with ROE. Additionally, we find a significant negative relationship of ESG with WACC in MSCI data and with Revenue in the Refinitiv data. The relationship of ESG with the remaining financial factors remain inconclusive.
For ESG separate ratings, the results have shown social score being significantly positive for profitability where governance score being significantly negative for profitability in Refinitiv data. Environment score does not have any significant relationship with financial performance. On the other hand, ESG controversy rating enhances firm´s return on equity and reduces WACC according to MSCI data.
The results of the study show that the effect of ESG on corporate financial performance is significant for Danish firms and Denmark as country of incorporation proves to be better for financial performance of companies. Additionally, year 2020 was the most significant negative year for financial performance, potentially due to the COVID-19 pandemic. Moreover, increase in firm size proves to significantly increase profitability and reduce WACC. | |
