ESG and financial performance in public and private companies: evidence from Brazil

Using detailed, questionnaire-based ESG data embedded in a broader corporate ranking for 156 public and 317 private Brazilian companies from 2017 to 2023, we examine the relationship between ownership structure, financial performance, and ESG performance. Panel regressions and propensity score matching reveal that public companies have lower ESG scores than private companies due to weaker governance. The gap is most pronounced among large companies with low leverage, high liquidity, and low capital intensity. Transitions from public to private ownership are associated with improved ESG scores. Prior profitability is positively linked to ESG scores, particularly in brown industries and among companies with weaker financial constraints, consistent with financial slack theory. Family ownership is positively associated with profitability, especially in private companies. A difference-in-differences design around an ESG disclosure regulation shows that ESG scores of public companies significantly increased after implementation. Our findings highlight the pivotal roles of ownership structure, financial slack, and disclosure mandates in shaping ESG performance in emerging markets, extending ESG analysis to private companies and identifying a family-ownership premium in profitability.