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The impact of Environmental, Social and Corporate Governance (ESG) practices on the financial performance of companies in emerging and frontier markets
KTH, School of Industrial Engineering and Management (ITM).
2018 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
Environmental, Social and Corporate Governance (ESG) påverkan på företags finansiella resultat i frontier och tillväxtmarknader (Swedish)
Abstract [en]

In this thesis, we explore the proprietary Environmental, Social and Corporate Governance (ESG) scores and analyze their impacts on firm valuation using the sample of 166 companies operating in 35 emerging and frontier markets. Three methods of ESG scores, Principal Component Analysis and regression analysis are used. The results indicate an economically significant relationship between the overall ESG measure and firm value mainly driven by the “Environmental” and “Capital allocation” sub-scores. An exploratory principal component analysis and an extensive list of firm characteristics is also employed in our regression analysis to address problems identified in previous studies - construct validity and endogeneity. The PCA revealed dominance of Environmental and Social components in the variance of the total ESG score. Finally, the strengths and weaknesses of proprietary ESG score and PCAderived index are recognized based on sector- and region level comparison and the opportunities to improve the ESG scorecard framework are identified.

Abstract [sv]

In den uppsatsen, forskning går på Environmental, Social and Corporate Governance (ESG) poäng och analyserar deras påverkan på företagsvärdering genom att använda ett urval av 166 företag som verkar i 35 frontier och tillväxtmarknader. Tre metoder av ESG mätning, Principal Component Analysis och regressionsanalyser tillämpades. Resultat tyder på ett ekonomiskt signifikant förhållande mellan totala ESG mätning och företagsvärdering vilket drivs av miljö och kapitalallokering delpoäng. Principalkomponentanalys och en utförlig lista av företagsegenskaper tillämpades också i våra regressionsanalyser för att adressera problem identifierade i tidigare studier - begreppsvaliditet och endogenitetsproblem. PCA tydde på dominans av miljöoch sociala aspekter i varians av den totala ESG poängen. Avslutningsvis, styrkor och svagheter av ESG-poäng och PCA-härlett index baserat på bransch- samt regionaljämförelser och möjligheterna för förbättring av ESG-mätning ramverk identifierades.

Place, publisher, year, edition, pages
2018. , p. 61
Series
TRITA-ITM-EX ; 2018:742
Keywords [en]
Corporate social responsibility; ESG; Emerging and frontier markets; Principal component analysis; Firm value; Financial performance.
Keywords [sv]
Corporate social responsibility; ESG; Tillväxtmarknader; Principalkomponentanalys; Företagsvärde; Finansiella resultat.
National Category
Engineering and Technology
Identifiers
URN: urn:nbn:se:kth:diva-264201OAI: oai:DiVA.org:kth-264201DiVA, id: diva2:1372343
External cooperation
East Capital
Supervisors
Examiners
Available from: 2019-11-22 Created: 2019-11-22 Last updated: 2019-11-22Bibliographically approved

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