CORPORATE ESG PERFORMANCE, CONTROVERSIES, AND FINANCIAL STABILITY: AN EMPIRICAL ANALYSIS USING MULTI-DIMENSIONAL FIRM-LEVEL DATA
Keywords:
ESG performance, corporate controversies, financial stability, sustainability, firm-level dataAbstract
The connection between corporate Environmental, Social, and Governance (ESG) performance, corporate controversies, and financial stability with multi-dimensional firm-level data. The study is based on an extensive dataset of ESG-related variables, controversy indices, and financial health proxies to determine the joint effects of sustainability practices and adverse events on corporate financial performance using an empirical method. Financial stability is determined based on well-known indicators like Altman Z-score and Piotroski F-score, whereas ESG performance is developed based on aggregated indicators covering the environmental, social, and governance aspects. The results identify a significant positive influence of ESG performance on the financial stability of firm, which means that more sustainable firms have a higher chance of reaching a long-term financial stability. In contrast, corporate scandals have been discovered to have a negative impact on financial stability, which underscores reputational and governance risks. Also, the findings indicate that ESG performance has the potential to reduce the negative impacts of controversies, highlighting its importance as a strategic risk management instrument. Overall, the research adds to the literature on ESG and corporate finance by incorporating multi-dimensional indicators into a single analytical framework. The results are useful to investors, policymakers, and corporate managers who would like to improve financial stability by integrating sustainable business practices.
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