Operationalizing the ESG metrics for social and governance performance (SGP) and firm performance: firm level determinants

Chow, Suat Chin (2023) Operationalizing the ESG metrics for social and governance performance (SGP) and firm performance: firm level determinants. MRes thesis, University of Nottingham.

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The aim of this study will evaluate the extent to which ESG (Environmental, Social and Governance) metrics are used in managing Firm Performance, in terms of SGP (Social and Governance Performance) and FP (Financial Performance) among publicly listed companies in Malaysia. The study of relationship between ESG and SGP includes determinants such as industry, size, digital technologies and targetsetting approach. The study of association between SGP and FP includes profitability and business growth. Further, this study intended to look at the future commitments and plans of top management in terms of pursuing the 17 UN-SDGs Goals.

The sample of the data is 781 firm-year observations from year 2019–2020 of 313 firms listed in the Bursa Malaysia. The raw data on determining the SGP for content analysis purposes were acquired from documentary sources downloaded from the Bursa Malaysia Website. The financial data in year 2021 were retrieved from the Thomson Reuters’ DataStream, inclusive of TOTAL ASSETS (TA), RETURN ON ASSETS (ROA), MARKET TO BOOK VALUE (MTBV). While the leadership statements in year 2020 which were predominantly made in the voluntarily reports had been extracted to analyse the language of top management in relation to their sustainability commitments and plans. Inter-Quartile Range (IQR) had been applied to determine the range of SGP. Using the stakeholder framework and Goal-Setting Theory, a number of hypothesesthat relate SGP to firm-specific characteristics had been developed. SPSS had been utilised to analyse the content analysis – SG scoring data to perform inferential statistics such as One Way ANOVA, independent-samples t-test, and regression. Further analysis had been performed using software programme NVivo 8 to explore companies’ commitment and plans in their leadership statement in regards of pursuing the 17 UN-SDGs.

This study suggested that very majority of companies have yet embraced the full potential of ESG and very few have set targets for their SGP. The results also indicated that industry, firm size, digital technologies and target-setting approach do have significant impacts on the SGP of a company, with the target-setting approach being the most dominant one. The results further indicated that SGP has a persistent and significant impact on the profitability and business growth of a company. Meanwhile, the most dominant SG subject in the leadership statement is the Product and Services Responsibility (3.8), a mini case study had been performed to provide the justifications. This subject acts as an important accelerator for UN-SDG 9, 11, 12, 16.

This study offered implications in several folds. In terms of theoretical implication, the current study which placed a laser focus on the SG pillar due to the growing demand aroused by the unprecedented pandemic, would be able to fortify the findings of the benefits of desired SGP in light of the financial ground, which is currently a missing gap in most literature reviews. For managerial implication, it would contribute to the insufficient knowledge on suitable management approaches for businesses to steer sustainability strategies. In terms of policy contribution, this study aimed to generate value for policymakers and regulators, proposing strategies or suggestions in solving the contemporary problem of low sustainability performance in Malaysia, which in turn realised the objectives of accomplishing the “Agenda 2030” through its SDG Roadmap and Malaysia Plans. Some limitations of the current research and suggestions for future research were discussed at the end of the thesis.

Item Type: Thesis (University of Nottingham only) (MRes)
Supervisors: Hung, Woan Ting
Keywords: ESG metrics; social and governance performance; sustainable development goals; financial performance; business performance; firm determinants
Subjects: H Social sciences > HG Finance
Faculties/Schools: University of Nottingham, Malaysia > Faculty of Arts and Social Sciences > Nottingham University Business School
Item ID: 73975
Depositing User: Chow, Suat
Date Deposited: 22 Jul 2023 04:40
Last Modified: 24 Nov 2023 07:34
URI: https://eprints.nottingham.ac.uk/id/eprint/73975

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