Investigating the marginal impact of ESG results on corporate financial performance

We employ a time-lagged panel regression model to investigate the impact of Environmental, Social, and Governance (ESG) performance on financial performance. The study is aimed at overcoming the ambiguities and recurring methodological inaccuracies of previous research; accordingly, it endorses a comprehensive metric for both dimensions. Using a sample of 350 European listed companies observed from 2014 to 2019, our findings support the non-linearity of the relationship, confirming its sensitivity to ESG performance and company-size factors. Moreover, they provide evidence for a positive and significant impact of ESG performance on financial performance, when an extra-financial disclosure mandatory regime is in force.