Examining Firms’ ESG Grades Determinants Through Financial and Non-Financial Characteristics During Covid-19 in Korea

This study employs Ordinary Least Squares (OLS) and quantile regression analyses to examine the determinants of Environmental, Social, and Governance (ESG) grades based on financial and non-financial characteristics of Korean companies amidst the global economic recession triggered by the COVID-19 pandemic. We investigate whether different determinants exist for varying levels of ESG grades (lower, middle, and higher groups). Analyzing cross-sectional data from 660 Korean companies, we find that both financial and non-financial characteristics significantly impacted ESG grades during the pandemic. Key determinants include firm value, size, and cash liquidity in financial characteristics, while firm age and industry type are vital non-financial determinants. Furthermore, the results highlight distinctions among ESG sub-dimensions, revealing that financial attributes predominantly influence environmental grades, whereas both financial and non-financial aspects shape social and governance grades. The findings elucidate ESG grade determinants and their differential relationships with various company characteristics during the challenging COVID-19 period in Korea.