| dc.description.abstract | This thesis investigates potential indicators of financial performance on European
oil and gas companies. With the use of panel data regressions, it seeks to detect
potential significant effects of traditional firm characteristics and various ESG
subcategories on financial performance. The companies in our sample are
observed monthly from January 2011 to March 2021. We find that previous
research is conflicting and many of the studies detect low statistical significance
between ESG scores and financial performance. In this thesis, financial
performance is measured by three different performance indicators; monthly
change in market capitalization, return on equity, and return on assets. The
traditional firm characteristics we implement in our regressions are firm size,
leverage, firm age, and market-to-book ratio. In addition to these characteristics,
we include regressions with both overall ESG factors (Environmental, Social,
Governance) and ten different subcategories of the overall ESG factors.
The result of our research suggests that commonly used firm characteristics are
more significant than ESG scores in relation to financial performance. Firm size
has the most substantial positive effect on financial performance, while leverage
and firm age has significant negative effects on financial performance. Although
we find that overall ESG scores do not have any significant effect on our
performance variables, we find that some of the ESG subcategories have some
significant effect. This research concludes that the overall effect of ESG scores on
financial performance is negative for European oil and gas companies as the
Human Rights score is the only subcategory that indicates a weak positive
significant effect. It seems that demanding ESG implementations and ESG
measures that cause major restructuring may appear to be a trade-off against
companies’ financial performance, although the trade-off could prove to be
positive for future financial performance. | en_US |
