Does corporate financial performance promote ESG: Evidence from US firms

Figures & data

Table 1. Variable description

Variables	Description
ESG	ESG score is based on voluntary company self-disclosure and other data. ESG score include real-time analysis of millions of pieces of publicly available print, online and broadcast news, and social media content. Its scope should span everything from national reporting to blogs, regulatory disclosures and non-governmental organization communications. If a firm has strength within each subcategory and assigns one point to these strengths; 0 is assigned if otherwise. The ESG engagement of a firm is measured by the total points a firm receives after counting all subcategories. A high ESG score indicates that the firm is friendly to its stakeholders and invests highly in ESG activities. But if there are separate environmental, social and governance scores, ESG is calculated as the average of Governance, social, and environment
RAO	Returns on assets
Minority interest	Minority interest refers to having an ownership stake in a company that is less than 50% of the total shares in terms of voting rights. Essentially, minority shareholders don’t exercise control over a company by way of votes, leaving them with little influence in the overall decision-making process.
Cash holding	The amount of cash held and available to spend rather than investing.
Market to book ratio (MTB)	Calculated as the ratio of the firm’s total market value divided by its total asset value
Inflation	Inflation is presented by the consumer price index

Table 2. Descriptive statistics

Variables	Mean	Median	Std.dev	Min	max
ESG	45.31593	50.44121	26.37697	0	97.49098
ROA	5.778461	5.409104	11.68207	−415.0148	102.2925
Cash holding	31.04416	25.25000	24.47297	0.12	99.38
Minority interest	310,078	0.000000	855,735	166,000	5.66e+07
MTB	3.293151	2.740000	36.76464	−1256.79	1404.12
Inflation	2.059492	2.099724	1.111107	−0.3555463	3.8391

Table 3. Hsiao’s (1986) panel specification test

Hsiao test	Statistics	P-value
F1	61,244.945	0.000
F2	0.8202	0.256
F3	19.59577	0.000

Table 4. Results of cross-section dependence Pesaran CD test

Variables	CD-test	p-Value	Accepted hypothesis
ESG	0.3219	0.7895	Cross-section independence
ROA	0.9854	0.5478	Cross-section independence
Cashholding	1.0587	0.4850	Cross-section independence
Minority interest	1.2154	0.4108	Cross-section independence
MTB	0.7955	0.6981	Cross-section independence
Inflation	1.1058	0.3621	Cross-section independence

Table 5. Panel unit root test

	Im-Pesqaran—Shin unit root test		Hadri stationary test
Variables	Statistics	p-Value	Statistics	p-Value
ESG	29.0245	0.000	1.5789	0.6520
ROA	57.0234	0.000	0.32897	0.8965
Cash holding	25.8599	0.000	2.01233	0.1485
Minority interest	32.8577	0.000	1.1245	0.5231
MTB	27.3256	0.000	1.5689	0.5589
Inflation	−30.9820	0.000	2.0937	0.1088

Table 6. Estimation results

$\mathit{\text{ES}}{G}_{i,t}$	Coefficients	P-value
$\mathit{\text{RO}}{A}_{i,t-1}$	0.089168	0.000
$\mathrm{Minority}\mathrm{\_}\mathrm{interest}{ }_{i,t-1}$	1.64e-06	0.000
$\mathrm{Cash}\mathrm{\_}\mathrm{holding}{ }_{i,t-1}$	0.0575539	0.000
$\mathrm{MT}{\mathrm{B}}_{i,t-1}$	0.0020664	0.727
$\mathrm{Inflatio}{\mathrm{n}}_{i,t}$	−3.175071	0.000
Intercept	54.23425	0.000
Wald chi2(5) = 332.06 Prob > chi2 = 0.0000
Shapiro_Wilk residual normality statistics 0.5156 with P-value = 0.2154
F-statistic = 46.70620 Prob(F-statistic) = 0.000000

Table 7. Effects of OPU, EPU, and firm’s leverage on CFP-ESG relationship

Interaction	Dependent variable	Coefficients
		${\beta }_1$	${\beta }_2$
Interaction with leverage	ESG	0.0844***	−2.859**
	Environment	0.00585	−1.1141
	Social	0.0120	−2.5286
	Governance	0.05452***	−30.037**
Interaction with Economic Policy Uncertainty	ESG	0.92327***	−0.00709***
	Environment	0.45007***	−0.00375***
	Social	0.38016***	−0.00309***
	Governance	0.01955	−0.000484
Interaction with Oil Price Uncertainty	ESG	2.36568***	−0.09046
	Environment	1.5876***	−0.0616***
	Social	1.4329***	−0.05530***
	Governance	0.6200***	−0.0226***

Table 8. Estimation results with added control variables

$\mathit{\text{ES}}{G}_{i,t}$	Coefficients	p-Value
$\mathit{\text{RO}}{A}_{i,t-1}$	0.08860	0.000
$\mathrm{Minority}\mathrm{\_}\mathrm{interest}{ }_{i,t-1}$	1.73e-06	0.000
$\mathrm{Cash}\mathrm{\_}\mathrm{holding}{ }_{i,t-1}$	0. 05128	0.000
$\mathit{\text{MT}}{B}_{i,t-1}$	0. 000686	0.907
$\mathit{\text{Inflatio}}{n}_{i,t}$	−3.127553	0.000
$\mathit{\text{GN}}{P}_{t-1}$	.0000549	0.000
$\mathrm{Net}\mathrm{\_}\mathrm{income}{ }_{i,t-1}$	7.87e-07	0.000
Intercept	52.84234	0.000
Wald chi2(7) = 459.47 Prob > chi2 = 0.0000
Shapiro_Wilk residual normality statistics 06856 with P-value = 0.3550
F-statistic = 49.629 Prob(F-statistic) = 0.000000

Table 9. Estimation results with an alternative ratio of firm’s performance

$\mathit{\text{ES}}{G}_{i,t}$	Coefficients	p-Value
$\mathit{\text{RO}}{E}_{i,t-1}$	0.08985	0.000
$\mathrm{Minority}\mathrm{\_}\mathrm{interest}{ }_{i,t-1}$	1.69e-06	0.000
$\mathrm{Cash}\mathrm{\_}\mathrm{holding}{ }_{i,t-1}$	0. 05377	0.000
$\mathit{\text{MT}}{B}_{i,t-1}$	0. 000662	0.787
$\mathit{\text{Inflatio}}{n}_{i,t}$	−2.92175	0.000
Intercept	48.4204	0.000
Wald chi2(7) = 319.75 Prob > chi2 = 0.0000
Shapiro_Wilk residual normality statistics 0.1862 with P-value = 0.1989
F-statistic = 47.911 Prob(F-statistic) = 0.000000

Table 10. Estimation results with alternative estimation method (GMM)

$\mathit{\text{ES}}{G}_{i,t}$	Coefficients	p-Value
$\mathit{\text{ES}}{G}_{i,t-1}$	1.17512	0.000
$\mathit{\text{RO}}{A}_{i,t-1}$	0.08929	0.000
$\mathrm{Min}\mathrm{\_}\mathrm{interest}{ }_{i,t-1}$	6.18e-07	0.000
$\mathrm{Cash}\mathrm{\_}\mathrm{holding}{ }_{i,t-1}$	0. 04422	0.000
$\mathit{\text{MT}}{B}_{i,t-1}$	0. 000608	0.885
$\mathit{\text{Inflatio}}{n}_{i,t}$	−3.1121	0.000
Intercept	30.0454	0.000
Arellano-Bond test for AR(1) in first differences: z = −24.81 Pr > z = 0.000 Arellano-Bond test for AR(2) in first differences: z = 1.81 Pr > z = 0.170
Sargan test of overid. restrictions: chi2(84) = 15.65 Prob > chi2 = 0.123

Hsiao, CA. 1986, Analysis of panel data Econometric Society Monographs No 11. Cambridge University Press

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