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1 – 3 of 3Randy Priem and Andrea Gabellone
This article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization…
Abstract
Purpose
This article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization companies across 17 countries that are component of the EURO STOXX 600 Index. By examining whether ESG has an impact on the cost of capital, this article contributes to the solutions to improve the impact of organizations and societies on sustainable development. The article further examines whether the effect is because of the environmental, social and/or governance components. In addition, the article analyses which WACC component (i.e. the cost of equity, the cost of debt, the beta or the leverage ratio) is affected. Furthermore, this article analyses whether a high ESG score can substitute for a weaker legal environment.
Design/methodology/approach
The results were obtained by using ordinary least squares panel data modelling to analyse the relationship between the ESG score and the cost of capital. The sample consists of companies that are part of the STOXX Europe 600 Index over the period 2018–2021, which is composed of 600 companies, including large, mid and small capitalization firms listed across 17 countries. The sample finally includes 1,960 firm-year observations.
Findings
Companies with a higher ESG score tend to have a lower cost of capital, but this relationship holds only for firms domiciled in countries with a weaker legal environment. In addition, these firms should not only increase their ESG score to create a more sustainable environment but also to reduce their cost of debt. Environmental and social factors have a significantly negative impact on the cost of capital only in countries with a weaker legal environment, while the governance component positively impacts the cost of capital by allowing firms to borrow more.
Research limitations/implications
There is not yet a standardized taxonomy to define ESG, making the study dependent on commercial data providers.
Practical implications
The new insights can be used by companies domiciled in countries with weaker legal environments to reduce their cost of capital. The results also allow us to know on which components of the ESG score to focus. It can also help policymakers, specifically those in countries with a weaker legal environment, to provide incentives to further stimulate ESG investments and disclosure, thereby contributing to a more sustainable society.
Social implications
To achieve the sustainable development goals put forward by the United Nations, it is important for firms to invest in ESG projects. It is nevertheless insightful to know whether these ESG investments, which are currently observed as a cost, also provide benefits to firms and in which countries. If firms clearly see the advantages of investing in ESG projects, they are likely to proactively engage in them.
Originality/value
This article is the first, to the best of the authors’ knowledge, to focus on 17 European countries, thereby capturing divergent legal environments. This setting allows us to answer the main novel research question, namely, whether the ESG score can act as a substitute for the legal environment in which the company is domiciled. The article also goes further than previous articles by examining whether the effect is because of the environmental, social and/or governance component and whether these impact the components of the weighted cost of capital, namely, the cost of equity, the cost of debt, the beta or the leverage ratio of the companies.
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Jacqueline Jarosz Wukich, Erica L. Neuman and Timothy J. Fogarty
Albeit gradual and uneven, the emergence of social and environmental reporting by publicly held corporations has been a major development in the last few decades. This paper aims…
Abstract
Purpose
Albeit gradual and uneven, the emergence of social and environmental reporting by publicly held corporations has been a major development in the last few decades. This paper aims to explore patterns of the emergence of these disclosures. Using an institutional theory lens, this paper considers mimetic, normative and coercive possibilities.
Design/methodology/approach
US publicly traded company data from 2013 to 2019 is used to test the hypotheses. Mimetic forces are proxied with corporate board interlock frequency. Normative ones use the extent of gender diversity on corporate boards. Measures of business climate and industry regulatory sensitivity proxy coercive potentiality.
Findings
Studied in isolation, each of the three forces through which organizations pursue the heightened legitimacy of enhanced environmental and social disclosures has credibility. The strongest support exists for mimetic and normative mechanisms, perhaps because the US government has been reluctant to make these expanded disclosures mandatory.
Research limitations/implications
In the world of voluntary action, more attention to diffusion is needed. For these purposes, better proxies will be needed to study change. Social and environmental information should be separated for individual analysis.
Practical implications
At least in the USA, companies are attentive to what other companies are doing. There is something to be said for the ethical dimension of corporate transparency.
Social implications
Governmental action in this area has not been effective, at current levels. Corporate leadership is essential. Critical information is shared about disclosure by board members.
Originality/value
Although institutional theory makes several appearances in this area, to the best of the authors’ knowledge, the current study is the first empirical archival study to examine the three forces simultaneously, providing evidence as to the relative magnitude of each institutional force on environmental and social disclosures. Should these disclosures not be mandated by government, this study shows pathways for enhanced disclosures to continue to spread.
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Talmo Curto de Oliveira, Julio Araujo Carneiro-da-Cunha, Alexandre Conttato Colagrai, Manuel Portugal Ferreira and Marcos Rogério Mazieri
Some sports organizations have a strategic objective of promoting human and social development through sports. However, it can be challenging to ensure that these objectives…
Abstract
Purpose
Some sports organizations have a strategic objective of promoting human and social development through sports. However, it can be challenging to ensure that these objectives, conveyed by the board, are fully internalized by the athletes. From the perspective of inter-organizational networks, this dissemination can occur through strategic alignment and diffusion of social capital. Therefore, the authors wanted to analyze if organizational policies from sports organizations are related to athletes' perception of social capital and strategic alignment.
Design/methodology/approach
The authors conducted a sequential mixed-method research. Firstly, a pilot study was conducted with two exploratory interviews with key informants from a sports organization, supported by documentary data from this organization. A thematic content analysis was carried out to identify relevant categories and subcategories to prepare a quantitative research instrument. In the second phase, a questionnaire was applied to 159 student-athletes from this organization. The collected data were analyzed by multiple linear regression.
Findings
From the pilot study, a set of five elements of strategic alignment, and three elements of social capital in the sports organization context were provided. In the quantitative phase, the authors identified that social capital is related to athletes' perception of shared values internalization in a sports organization, but strategic systems were not.
Practical implications
Sports managers could better promote internal policies if there is social capital among athletes rather than implementing top-down deployed communications.
Social implications
Policymakers could better predict the effectiveness of a foment request by sports organizations considering not only strategic systems communication deployment but also the existence of social capital in a sports organization. It is a broader mechanism to understand the capacity of a sports organization in disseminating good values among their members.
Originality/value
Different from traditional companies, in sports organizations, only social capital is related to the internalization of organizational policy by athletes rather than strategic alignment initiatives.
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