Article: Does ESG performance influence accounting- and market-based firm risk? Journal: International Journal of Sustainable Economy (IJSE) 2024 Vol.16 No.4 pp.383 - 402 Abstract: The relevance of corporate social responsibility (CSR) is increasing as an important factor in managers' decision-making process. Future sustainable and continuing corporate financial performance (CFP) can only be achieved by considering stakeholders' expectations and improving corporate social performance (CSP). Being a driver of a company's prospective economic performance, CSR has become an element of risk analysis, which explains its growing relevance for authorities, banks, and investors. Therefore, this study examines the relationship between CSP and firm risk, hypothesising a risk-mitigating effect of CSP. Using corporates' leverage and beta as indicators for firm-idiosyncratic and systematic risk, 250 firm-year observations between 2015 and 2019 of the German DAX 30 and MDAX are analysed within multiple linear regression. However, our findings do not provide clear results while indicating contrary effects on systematic and unsystematic risk instead, somehow reflecting the discrepancy of the current discourse on this topic. Inderscience Publishers - linking academia, business and industry through research

Title: Does ESG performance influence accounting- and market-based firm risk?

Authors: Nadine Ladnar; Moritz Schätzlein; Ricardo Palomo; Alexander Zureck

Addresses: CEU San Pablo University, CEINDO-CEU Doctoral Program in Economy and Law, C/Tutor, 35 – 28008 Madrid, Spain; ISF Institute for Strategic Finance, FOM University of Applied Sciences, Leimkugelstr. 6, 45141 Essen, Germany ' FOM University of Applied Sciences, Essen, Germany ' CEU San Pablo University, C/Tutor, 35 – 28008 Madrid, Spain ' ISF Institute for Strategic Finance, FOM University of Applied Sciences, Essen, Germany

Abstract: The relevance of corporate social responsibility (CSR) is increasing as an important factor in managers' decision-making process. Future sustainable and continuing corporate financial performance (CFP) can only be achieved by considering stakeholders' expectations and improving corporate social performance (CSP). Being a driver of a company's prospective economic performance, CSR has become an element of risk analysis, which explains its growing relevance for authorities, banks, and investors. Therefore, this study examines the relationship between CSP and firm risk, hypothesising a risk-mitigating effect of CSP. Using corporates' leverage and beta as indicators for firm-idiosyncratic and systematic risk, 250 firm-year observations between 2015 and 2019 of the German DAX 30 and MDAX are analysed within multiple linear regression. However, our findings do not provide clear results while indicating contrary effects on systematic and unsystematic risk instead, somehow reflecting the discrepancy of the current discourse on this topic.

Keywords: ESG performance; environmental; social; governance; accounting-based firm risk; market-based firm risk; corporate social responsibility; CSR; sustainability; corporate social performance; CSP.

DOI: 10.1504/IJSE.2024.141705

International Journal of Sustainable Economy, 2024 Vol.16 No.4, pp.383 - 402

Received: 19 Aug 2022
Accepted: 10 Jan 2023
Published online: 01 Oct 2024 *

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Title: Does ESG performance influence accounting- and market-based firm risk?

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