Do ESG Ratings Affect Firm Performance of Multi Business Groups? The Role of Board Characteristics in Firm Performance Mediated by Governance Score

Abstract The interest of Environmental, Social, and Governance (ESG) scores is increasing in both academic research and industry practices. Many previous studies have examined the effects of ESG scores on the operating and market performance of firms but have found mixed results. The objective of this study is to provide a preliminary analysis of the effect of ESG scores on financial performances of the Korean multi-business group conglomerates, the Chaebols. Using a panel sample for fixed/random effects in regression analyses, this study investigates a sample of all the 32 Chaebol firms in the period of 2014–2019. Our results showed that the governance score of the firm has a positive effect on financial performances. Further, we analyzed the factors affecting governance scores of the firm in relation to board characteristics. Out of four independent variables, three showed significant results. These are CEO duality, the board size, and the average age of board members of the firms. The results remain consistent and significant after robustness testing.