ESG Activities and Firm Value of Business Groups

PurposeThe purpose of this study is to investigate the association between ESG activities and firm value of business groups, particularly focusing on the fact that ESG activities are primarily undertaken by large companies, especially chaebols. MethodologyA regression analysis was conducted using the ESG evaluation score and Tobins’Q as proxy for ESG activities and firm value. Firm size, ROA, and other variables were included as control variables. Total number of research samples is 5,228, of which 1,219 are chaebols. FindingsFirst, we confirm that chaebols outperform non－chaebols in ESG activities. This result is attributed to the significant costs and expertise required to establish ESG systems. Second, while the ESG activities of non－chaebols are positively associated with firm value, we cannot find the effect of ESG activities on firm value in chaebols. This result indicates market skepticism towards the authenticity of chaebols’ ESG efforts, thereby suggesting that ESG activities are not incorporated in firm value. ImplicationsThis study raises the needs for substantive and authentic ESG activities within corporations and regulatory authorities, by showing the possibility that ESG activities may not benefit companies. It also provides a basis for their ESG establishment.