Effects of Country- and Firm-Specific Factors on ESG Performance: A Cross-Country Analysis for Emerging Markets

Abstract

This paper aims to shed the light on factors influencing ESG performance in emerging markets. This paper employed data from 20 emerging markets from 2013-2022 and investigated factors which classified into 2 dimensions, country- and firm- specific factors. Country specific factors include economic growth, level of corruption, legal system, and economic equality. Firm specific factors are firm size, capital structure, performance, and free cash flows. Pooled OLS regression controlled for country- and year- fixed effect are employed. The results show that number of firms that reported ESG performance has increased as well as the average ESG score has risen over the past a decade. Results on country-specific determinants reveal that GDP growth is negatively impact on ESG performance. A company based in common law countries shows higher ESG performance. In addition, size and debt-to-equity ratio are positively influence ESG performance. These results suggest both company and country characteristics effect ESG performance in emerging market. Thus, investors who seek for ESG performance should give more attention on these factors for making their decision