Small Listed Firm’s Insights: Increasing Importance of “Managerial Efficiency” on the Relationship between ESG and Financial Performance
Article Sidebar
Main Article Content
บทคัดย่อ
The objective of this study is to examine the influence of environmental, social, and governance (ESG) performance towards financial performance. Financial performance is evaluated through return on assets (ROA) and Tobin's Q, while the study also examines the influence of managerial efficiency. The sample includes small listed companies on the Thai Stock Exchange from 2016 to 2021, comprising a total of 258 companies (1,391 samples). The data is collected from SETSMART and sustainability reports and analyzed based on Hayes' PROCESS analysis (2013). The findings of this study indicate the absence of a relationship between ESG and Tobin's Q. However, ESG demonstrates a negative relationship with ROA. Additionally, the study reveals a positive influence of managerial efficiency on the relationship between ESG and financial performance (ROA and Tobin's Q). Managerial efficiency plays a crucial role in addressing debates and bridging gaps in previous research findings. It serves as a driving force for ESG practices, enabling small firms to outperform those with lower levels of management effectiveness.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
Aboud, A. and Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies, 8(4), 442-458.
Al Amosh, H., Khatib, S. F. A. and Ananzeh, H. (2023). Environmental, social and governance impact on financial performance: Evidence from the levant countries. Corporate Governance: The International Journal of Business in Society, 23(3), 493-513.
Berger, P. G. and Ofek, E. (1995). Diversification’s effect on firm value. Journal of Financial Economics, 37(1), 39-65.
Bhandari, K. R., Ranta, M. and Salo, J. (2022). The resource-based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm’s embeddedness into ecology, society, and governance. Business Strategy and the Environment, 31(4), 1525-1537.
Bodhanwala, S. and Bodhanwala, R. (2023). Environmental, social and governance performance: Influence on market value in the COVID-19 crisis. Management Decision, 61(8), 2442-2466.
Chantabutr, P. (2022). The impact of environmental, social, and governance on the financial distress risk of companies listed on the stock exchange of Thailand: The context of economic crisis. Journal of Accounting Profession, 18(59), 26-52.
Chen, J. and Chen, J. (2020). Does managerial ability affect the quality of environmental financial disclosure?. Sustainability Accounting, Management and Policy Journal, 11(6), 1055-1073.
Chen, S. S. and Lin, C. Y. (2018). Managerial ability and acquirer returns. The Quarterly Review of Economics and Finance, 68(1), 171-182.
Demerjian, P., Lev, B. and McVay, S. (2012). Quantifying managerial ability: A new measure and validity tests. Management Science, 58(7), 1229-1248.
Duque-Grisales, E. and Aguilera-Caracuel, J. (2021). Environmental, social and governance (ESG) scores and financial performance of multilatinas: Moderating effects of geographic international diversification and financial slack. Journal of Business Ethics, 168(2), 315-334.
Freeman, R. E. (1994). The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 4(4), 409-421.
Jouber, H. (2022). Women leaders and corporate social performance: Do critical mass, CEO managerial ability and corporate governance matter?. Management Decision, 60(5), 1185-1217.
Junius, D., Adisurjo, A., Rijanto, Y. A. and Adelina, Y. E. (2020). The impact of ESG performance to firm performance and market value. Jurnal Aplikasi Akuntansi, 5(1), 21–41.
Kalia, D. and Aggarwal, D. (2023). Examining impact of ESG score on financial performance of healthcare companies. Journal of Global Responsibility, 14(1), 155–176.
Kallner, A. (2018). Laboratory statistics: Methods in chemistry and health sciences (2nd ed.). Amsterdam: Elsevier.
Khan, M. A. (2022). ESG disclosure and firm performance: A bibliometric and meta-analysis. Research in International Business and Finance, 61, 101668.
Lang, L., Ofek, E. and Stulz, R. (1996). Leverage, investment, and firm growth. Journal of Financial Economics, 40(1), 3-29.
Lee, J., Kim, S. and Kim, E. (2023). The effect of managerial ability on voluntary disclosure of carbon emissions. Borsa Istanbul Review, 23(3), 685-695.
Lu, L. W. and Taylor, M. E. (2018). A study of the relationships among environmental performance, environmental disclosure, and financial performance. Asian Review of Accounting, 26(1), 107-130.
Maji, S. G. and Lohia, P. (2023). Environmental, social and governance (ESG) performance and firm performance in India. Society and Business Review, 18(1), 175-194.
Margolis, J. D. and Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268-305.
Salehi, M., Bazrafshan, A. and Hosseinkamal, M. (2021). The relationship between supervision quality, CEO’s ability and authority with firm performance. Journal of Facilities Management, 19(2), 150–173.
Sancha, C., Gutierrez-Gutierrez, L., Tamayo-Torres, I. and Gimenez Thomsen, C. (2023). From corporate governance to sustainability outcomes: The key role of operations management. International Journal of Operations & Production Management, 43(13), 27-49.
Simamora, A. J. (2023). Firms’ performance, risk taking and managerial ability. International Journal of Productivity and Performance Management, 72(3), 789-808.
Suttipun, M., Khunkaew, R. and Wichianrak, J. (2023). The impact of environmental, social and governance (ESG) reporting and female board members on financial performance: Evidence from Thailand. Journal of Accounting Profession, 19(61), 89-111.
The Stock Exchange of Thailand. (2019). SET’s supplier code of conduct. Retrieved January 3, 2023, from https://bit.ly/3RdCBIY
The Stock Exchange of Thailand. (2022). Sustainable procurement. Retrieved January 16, 2023, from https://supplychainguru.co.th/articles/sustainability/what-is-sustainable-procurement-and-its-importance/
The Stock Exchange of Thailand. (2023). Sustainability disclosure & reporting. Retrieved January 20, 2023, from https://www.setsustainability.com/page/disclosure
Tampakoudis, I., Noulas, A., Kiosses, N. and Drogalas, G. (2021). The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?. Corporate Governance, 21(6), 1117-1141.
Theparak, N., Ekasingh, E., Trakarnsirinont, W. and Kitiwong, W. (2022). Relationship between level of sustainable development goals disclosure related to industry sector and firm value of set100 companies listed on the stock exchange of Thailand. Journal of Accounting Profession, 18(59), 53-80.
United Nations. (2019). Guidance on core indicators for entity reporting on contribution towards implementation of the sustainable development goals. Retrieved January 16, 2023, from https://unctad.org/system/files/official-document/diae2019d1_en.pdf
Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169-178.
Velte, P. (2020). Does CEO power moderate the link between ESG performance and financial performance?. Management Research Review, 43(5), 497-520.
Yung, K. and Chen, C. (2018). Managerial ability and firm risk-taking behavior. Review of Quantitative Finance and Accounting, 51(4), 1005-1032.
Zhang, H. (2023). Are CEOs rewarded for managerial ability? Evidence from nonprofit hospitals. Journal of Public Budgeting, Accounting & Financial Management, 35(2), 219-243.