25th Malaysian Finance Association International Conference (MFAIC) 2023, 2023
This article presents a comprehensive review of environmental, social, governance (ESG), and cont... more This article presents a comprehensive review of environmental, social, governance (ESG), and controversial news on the financial performance of listed companies in China. With the increasing emphasis on sustainable and responsible investing, understanding the relationship between ESG factors and financial performance has become crucial for investors, regulators, and corporate decision-makers. However, this growing emphasis on ESG has also led to the emergence of a concerning phenomenon known as "ESG greenwashing". One way to combat ESG greenwashing is to use controversial news. Controversial news is news that is likely to generate negative attention for a company. By tracking controversial news, ESG rating agencies can identify companies that are engaging in ESG greenwashing. The accuracy of ESG rating reports would be improved if ESG rating agencies incorporated controversial news as an indicator into their ESG evaluation systems. This study examines the existing literature on gr eenwashing reduction and controversial events news, with a specific focus on the methodologies employed to investigate the relationship between ESG practices and financial performance. A critical review of these methodologies reveals that many prior studies have been plagued by a common omission: the failure to consider other significant variables or interference factors that can impact the relationship between ESG practices and financial performance. As a result, these studies may not have adequately addressed the issue of spurious relationships, which can arise when two variables appear to be correlated but are not actually causally related. This common error in statistical analysis can lead to misleading conclusions. To avoid these research traps, this study suggests that future studies employ robustness tests and select one-period lag dependent variables data to provide a more accurate and comprehensive understanding of the relationship between ESG practices and financial performance.
25th Malaysian Finance Association International Conference (MFAIC) 2023, 2023
This article presents a comprehensive review of environmental, social, governance (ESG), and cont... more This article presents a comprehensive review of environmental, social, governance (ESG), and controversial news on the financial performance of listed companies in China. With the increasing emphasis on sustainable and responsible investing, understanding the relationship between ESG factors and financial performance has become crucial for investors, regulators, and corporate decision-makers. However, this growing emphasis on ESG has also led to the emergence of a concerning phenomenon known as "ESG greenwashing". One way to combat ESG greenwashing is to use controversial news. Controversial news is news that is likely to generate negative attention for a company. By tracking controversial news, ESG rating agencies can identify companies that are engaging in ESG greenwashing. The accuracy of ESG rating reports would be improved if ESG rating agencies incorporated controversial news as an indicator into their ESG evaluation systems. This study examines the existing literature on gr eenwashing reduction and controversial events news, with a specific focus on the methodologies employed to investigate the relationship between ESG practices and financial performance. A critical review of these methodologies reveals that many prior studies have been plagued by a common omission: the failure to consider other significant variables or interference factors that can impact the relationship between ESG practices and financial performance. As a result, these studies may not have adequately addressed the issue of spurious relationships, which can arise when two variables appear to be correlated but are not actually causally related. This common error in statistical analysis can lead to misleading conclusions. To avoid these research traps, this study suggests that future studies employ robustness tests and select one-period lag dependent variables data to provide a more accurate and comprehensive understanding of the relationship between ESG practices and financial performance.
Uploads