Abstract
This study examines the effect of a firm’s environmental, social, and governance (ESG) activities on its financial performance during the acute uncertainty caused by the COVID-19 pandemic. Due to the COVID-19 pandemic, most Korean firms suffered unexpected difficulties in their business activities in early 2020, and their financial performance deteriorated significantly. The purpose of this study is to empirically analyze whether a firm’s ESG activities affect its financial performance during a business crisis. The results show that, in the first quarter of 2020, when the impact of the COVID-19 pandemic occurred, firms’ earnings dropped significantly; however, we found that the higher the performance of ESG activities, the smaller the decline in earnings. The results imply that, in an environment of uncertainty, the performance of a firm’s ESG activities is reflected in its financial outcomes. This result implies that trust and bond between firms and stakeholders, as formed through investments in social capital, are rewarded when the overall level of sustainability in markets is negatively impacted. In addition, our results suggest that the performance of nonfinancial activities is useful information for stakeholders’ decision making in relation to market uncertainty.
Highlights
As the COVID-19 pandemic affected capital market volatility in the first quarter of2020, the financial condition of most firms in South Korea deteriorated significantly
Whereas existing research showed mixed findings on the relationship between ESG activities and corporate financial performance, this study shows that ESG activities have a positive effect on financial performance during the business crisis caused by the COVID-19 pandemic
As shown in previous studies, a firm’s ESG activities can affect its financial performance during the business crisis caused by the COVID-19 pandemic in the following three ways
Summary
2020, the financial condition of most firms in South Korea deteriorated significantly. This unpredictable environment continues as the COVID-19 pandemic persists. The spread of nonface-to-face transactions in the future will significantly change the business environment that existed before COVID-19, changing the management paradigm of multiple firms. Many companies have been paying attention to forms of sustainable management that consider environmental and social responsibilities, as well as economic performance, as sustainable growth cannot be achieved by focusing only on economic performance. CSR is well known as decisions and behaviors that are compatible with socially desirable goals and values [13]. Social issues and ethical responsibilities arising from relationships with various stakeholders are the main frameworks of CSR.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
