Impact of Sustainability on Firm Value and Financial Performance in the Air Transport Industry

Yaghoub Abdi,Xavier Càmara-Turull,Xiaoni Li

doi:10.3390/su12239957

Abstract

In this study, we examine the extent to which the implementation of environmental, social, and governance (ESG) disclosures influence the firm value and financial performance of airlines. The panel data analysis is applied to the set of collected data from the Thomson Reuters Eikon database for the sample of 27 airlines worldwide from 2013 to 2019. Findings of this study support the positive relationship between the environmental pillar score (Env) and governance pillar score (Gov), with market-to-book ratio and Tobin’s Q as proxies for firm value and financial performance, respectively. This finding implies that an increase in both pillars leads to higher market value and financial efficiency for investigated airlines. Therefore, an airline’s effort to improve Env and Gov dimensions will lead to higher market value and return on invested funds. In contrast, the social pillar disclosure in both models is found to have a significant negative association with the dependent variables, showing that airlines’ social activities result in lower value as well as level of performance.

Highlights

Air transport is considered one of the most popular, rapidly growing industries, offering a broad range of services and community benefits
The results reveal that both environmental pillar score (Env) and governance pillar score (Gov) are positive but insignificantly associated with a firm’s market-to-book ratio, implying that an increase in both pillars leads to a higher ratio
We find that an increase in both pillar disclosures leads to a higher market-to-book ratio and financial performance of airlines

Summary

Introduction

Air transport is considered one of the most popular, rapidly growing industries, offering a broad range of services and community benefits. Air transportation has attracted attention from people directly involved in the business, and from financial and industrial experts. As awareness of corporate responsibility and business ethics have increased, the development of long-term strategies and investments to achieve a sustainable industry have been key to guaranteeing the future of air cargo [3]. Both investors and consumers are attracted by the role of environmental and social issues, as they increasingly support and empower businesses with regards to keeping shares and products more sustainable. Airlines are aligning themselves by integrating socially responsible aspects into their business practices for the purpose of sustainable development and competition [4]

Methods

Discussion

Conclusion