The Determinants of ESG Ratings in Family Firms : Evidence from the Nordic Market
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- Master of Science 
By drawing on a sample of 528 public-traded corporations in the Nordic countries, this thesis explores the determinants of ESG ratings in family firms. We address three important research questions: (1) are family firms associated with lower ESG ratings than non-family firms; (2) do the unique characteristics of family firms materialize in a different prioritization of E, S, and G initiatives than their non-family counterparts; and (3) is the extent to which a family can control the firm’s behavior decisive for their ESG rating. We find that family firms exhibit lower ESG ratings than non-family firms because they underperform on ESG initiatives that may threaten family control. Specifically, family firms tend to downgrade initiatives that affect internal stakeholders (managers, shareholders, and the workforce). However, they show the same level of ESG engagement as non-family firms on initiatives that concern external stakeholders and thus give reputational benefits. Furthermore, we demonstrate that family firms’ ESG ratings are highly contingent upon the family’s ability to shape the firm’s behavior, goals, and strategies. We find that in firms with a family member as CEO or if the family controls the board of directors, the ESG ratings are even lower. On the contrary, family-founded firms have better ESG ratings than other family firms. Our theoretical contribution is based on the concept of SEW. We argue that retaining family control is the most critical factor in shaping family firms’ ESG engagement.
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2022