Influence of ESGC Indicators on Financial Performance of Listed Pharmaceutical Companies.

Alberto A López-Toro,Mercedes Rodríguez-Fernández,María Dolores Benítez-Márquez,Eva María Sánchez-Teba

doi:10.3390/ijerph18094556

Alberto A López-Toro, Mercedes Rodríguez-Fernández + Show 2 more

Open Access

https://doi.org/10.3390/ijerph18094556

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Abstract

The pharmaceutical industry, concerned about the impact of its activity, has integrated responsible principles and practices with a view to improving its sustainable and financial performance. This study analyzes the relationship between environmental, social, governance, and controversy indicators and financial performance, measured through return on equity (ROA), return on assets (ROE), and Tobin’s Q, which are applied to the listed companies in the Nasdaq US Smart Pharmaceuticals Index. This index is composed of 30 international companies with a presence at the global level. All the data have been extracted from the Thomson Reuters database. The analysis was performed using structural equation modeling implemented with partial least squares. The results confirm the positive relationship between the construct composed of environmental, social, and governance (ESG) indicators and the aforementioned financial ratios. Additionally, a positive relationship of the controversy indicator with Tobin’s Q is supported. This suggests that the pharmaceutical multinationals focus their investments in sustainability on ESG and pay attention to controversies to boost the visibility of the company and thus increase its value. These conclusions confirm that investing in ESG is a profitable strategy. It is also relevant for managers as it increases the profits and the market value of multinational pharmaceutical companies.

Highlights

Corporate governance, the environment, and society indirectly affect the performance and activity of companies [1]
2019, three ratios of the aforementioned selected pharmaceutical companies are considered in the model: the Tobin’s Q for year 2019 (TOBIN19), return on equity for year 2019 (ROE19), and return on assets for year 2019 (ROA19)
The data for the ESG indicators and controversies are from the year 2018, and the financial performance indicators are from the year 2019, with a time-lapse of one year to note their influence [20,24]

Summary

Introduction

The environment, and society indirectly affect the performance and activity of companies [1]. The interrelationship between CSR and sustainable development has more recently been highlighted in the 2030 agenda and the alignment of companies with the Sustainable Development Goals [2] In this sense, CSR is the contribution of companies to sustainable development [3], making social and corporate benefits compatible [4] and maximizing stakeholder satisfaction [5]. CSR is the contribution of companies to sustainable development [3], making social and corporate benefits compatible [4] and maximizing stakeholder satisfaction [5] To this end, CSR voluntarily incorporates social, environmental, and good governance concerns that are part of the company’s strategy into all its operations [3]. Enterprises need their contributions to sustainable development to be visible and valued on the stock exchange in order to improve their competitiveness and financial performance

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