A Research on ESG Commitment, Governance, and Firm Value

We perform a research to find valuable insights into on ESG Commitment, Governance and Firm Value. Non-financial firms from KRX from 2011 to 2020 are employed as our samples ESG related scores are taken from Korea Institute of Corporate Governance and Sustainability. Additional governance variables are employed including chaebol affiliation, % of foreign investors, and outside directors. We find that firms more concretely interested in each of E, S, G activities are more concerned about any kind of ESG related activities. It is highly likely that chaebol affiliated firms and firms with more foreign investors are more concerned about ESG related activities. More outside directors are positively and significantly correlated with E, S, and ESG variables, but negatively and significantly correlated with G variables. From regression analysis we find that ESG activities help increase firm value in KOSPI market. We document that chaebol affiliation is negatively and significantly related to firm value, but more foreign shares and more outside directors let firm value increase, all under control variables. Environmental investment by higher foreign shares and outside directors helps positively and significantly increase firm value, but shows no significant joint effect with chaebol affiliation. Social investment by higher foreign shares and outside directors help positively and significantly increase firm value, but with significant and negative joint effect with chaebol affiliation. It is also found that better governance scores by higher foreign shares and outside directors help positively and significantly increase firm value, but with significant and negative joint effect with chaebol affiliation. So we document that it is highly likely that more ESG investment given better governance scores and better governance variables jointly help increase firm value, but hurt firm value in jointly with chaebol affiliation: seemingly a hint of ESG washing by chaebols.