A Research on ESG Commitment and Corporate Performance

ESG management matters ever more - globally. Firms, especially public firms are practically required to make investments in ESG. ESG investment is a way to satisfy social requirements on the one hand, but costs, on the other. Further, corporate governance is expected to affect the way ESG commitment is related to firm value. We test this idea using a data set of 3,943 firm-years from KRX from the years of 2011 to 2020. So we try to check what role ESG and corporate governance play in determining corporate market valuation in KRX market. We find that ESG commitment is mostly insignificantly, and sometimes negatively related to corporate market valuation. Again, ESG commitment in connection with governance in the form of chaebol affiliation is mostly significantly, and negatively related to corporate market valuation. So our research suggests that ESG commitment is currently not so much appreciated in KRX market, and that ESG investment with governance consideration is strongly likely to turn out with negatively significant effect on firm value. Why? It maybe because Korean firms, chaebol affiliated firms also, are not so much interested in ESG commitment yet. Lack of interest of firms leads to less ESG commitment, which, in turn, may call about lower evaluation of ESG activities in the market.