Impacts of ESG Factor on Corporation Evaluation: Evidence from BYD’s Acquisition of Xi’an XIVO Bus

Abstract

As a matter of fact, ESG factor shows a great importance in corporation valuation. This paper combines the collective consciousness of global sustainability to find a new way of valuing companies in terms of their expressiveness in the three directions of environment, social responsibility, and corporate governance and conjunction with the traditional income approach. The role of ESG factors is incorporated into calculating the operating revenue growth rate by taking the acquisition of Fresh XIVO Bus Group by BYD Company Limited, one of the most ESG-representative new energy automobile companies in China, as an example. Firstly, we compare the profitability of the enterprise before and after the acquisition to discuss the impact of ESG behaviors on the enterprise, then construct a DCF model to predict the cash flow performance in the next five years after the acquisition, and finally indicate the market value of the enterprise under the role of ESG through discounting. According to the analysis, strong ESG performance has helped BYD offset some of the pressures that existed due to the retreat of government subsidies. BYD will start with a slight deceleration but continue to thrive over the next five years.