Government owned firms’ emphasis on ESG

Abstract

We investigate 489 firms’ emphasis on ESG during the period from 2009 to 2018. We expand existing research by investigating the impact of government ownership on a firm’s ESG scores. We find that government ownership causes ESG scores to be significantly higher in the year 2009 in comparison to firms that do not have government ownership. However, this significant difference between ESG scores of government owned firms and non-government owned firms is reduced by the year 2018 as a result of convergence of their scores. Furthermore, we find evidence that for a given government owned firm, an increase in ESG score causes a positive movement in financial performance (Tobin’s Q). We also establish evidence of bidirectional causality between ESG and Tobin’s Q. Lastly, we document that should both government owned and non-government owned firms be exposed to a single industry-specific factor, the upward trend in ESG score is similar for both groups. Our results collectively indicate that government owned firms are ahead of their non-government counterparts in their ESG focus.