★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★Open research. Global perspectives.
editor@theamericanjournals.comPublisher Home ↗
Management and Economics OPEN ACCESS

ESG Governance Metrics and Market Valuation in Emerging Financial Markets

Yewande Kolade
University of Chicago, USA
tajmei 2023
VOL. 5 / NO. 10 OCTOBER
FULL TEXT PP. 122-140
DOWNLOAD PDF

View all articles in this issue ↗

VOLUME 5
ISSUE 10
YEAR 2023
PAGES 122-140
RESEARCH OVERVIEW

Abstract

This paper examines the relationship between environmental, social, and governance (ESG) metrics, particularly governance mechanisms, and market valuation in emerging financial markets. Drawing on empirical evidence from previous studies across multiple emerging economies and foundational work by Ogundipe (2019) on Nigerian deposit money banks, this research synthesizes findings on how board characteristics, ownership structures, and regulatory contexts influence firm value. A critical distinction emerges between substantive governance, characterized by active board oversight, meeting frequency, and stakeholder engagement, and symbolic governance, which involves formal compliance structures without demonstrable monitoring intensity. Evidence indicates that markets in emerging economies reward observable governance actions rather than merely stated independence, with board diligence, gender diversity, and sustainability committees showing consistent positive associations with firm valuation. However, the governance pillar of ESG demonstrates more mixed effects compared to environmental and social dimensions, suggesting context-dependent valuation impacts. Ownership concentration, regulatory reforms, and industry-specific factors moderate these relationships. The findings have significant implications for corporate boards seeking to enhance market value, investors incorporating governance diagnostics into valuation models, and policymakers designing disclosure frameworks that emphasize auditable governance intensity over formal compliance checklists.

RESEARCH TOPICS

Keywords

Governance market valuation financial markets gender diversity ESG
SOURCES & SCHOLARSHIP

References

  1. Adu, D. (2022). Sustainable banking initiatives, environmental disclosure and financial performance: The moderating impact of corporate governance mechanisms. Business Strategy and the Environment, 31(6), 2688-2699. https://doi.org/10.1002/bse.3033
  2. Batra, S., Bhatia, A., & Marwaha, D. (2022). The influence of board factors and gender diversity on the ESG disclosure score: A study on Indian companies. Global Business Review. https://doi.org/10.1177/09721509221132067
  3. Chebbi, K., & Ammer, M. A. (2022). Board composition and ESG disclosure in Saudi Arabia: The moderating role of corporate governance reforms. Sustainability, 14(19), 12173. https://doi.org/10.3390/su141912173
  4. Disli, M., Yilmaz, M., & Mohamed, F. F. M. (2022). Board characteristics and sustainability performance: Empirical evidence from emerging markets. Sustainability Accounting, Management and Policy Journal, 13(4), 929-952. https://doi.org/10.1108/sampj-09-2020-0313
  5. Dong, M., & Baek, K. H. (2022). The effect of ESG ratings on the value of Chinese listed companies. A·taebijeuniseuyeon-gu, 13(1), 153-168. https://doi.org/10.32599/apjb.13.1.202203.153
  6. Fuadah, L. L., Mukhtaruddin, M., Andriana, I., & Arisman, A. (2022). The ownership structure, and the environmental, social, and governance (ESG) disclosure, firm value and firm performance: The audit committee as moderating variable. Economies, 10(12), 314. https://doi.org/10.3390/economies10120314
  7. Kamaludin, K., Ibrahim, I., Sundarasen, S., & Faizal, O. (2022). ESG in the boardroom: Evidence from the Malaysian market. International Journal of Corporate Social Responsibility, 7, 4. https://doi.org/10.1186/s40991-022-00072-2
  8. Makeeva, E., Popov, K. A., & Dikhtyar, A. A. (2022). Board of directors characteristics: How they are related to ESG rankings and value of Russian companies. Российский журнал менеджмента, 20(4), 459-485. https://doi.org/10.21638/spbu18.2022.403
  9. Naeem, M. A., & Ullah, H. (2022). The impact of ESG practices on firm performance: Evidence from emerging countries. Journal of Business Research, 145, 524-535.
  10. Naeem, M., Ullah, H., & Kakakhel, S. J. (2022). Environmental, social and governance practices and capital market response: Evidence from emerging countries. Business & Economic Review, 14(2), 1-24. https://doi.org/10.22547/ber/14.2.1
  11. Ogundipe, O. M. (2019). Corporate governance mechanisms and firm value: An empirical study of Nigerian deposit money banks. The American Journal of Interdisciplinary Innovations and Research, 1(1), 1-10. https://www.theamericanjournals.com/index.php/tajiir
  12. Prabawati, P. I., & Rahmawati, I. P. (2022). The effects of environmental, social, and governance (ESG) scores on firm values in ASEAN member countries. Jurnal Akuntansi dan Auditing Indonesia, 26(2), 65-75. https://doi.org/10.20885/jaai.vol26.iss2.art2
  13. Temiz, H., & Özdemir, F. S. (2022). The role of board of directors on environmental, social and governance disclosure (ESG): Evidence from emerging markets. Muhasebe ve Denetime Bakış, 22(68), 189-210. https://doi.org/10.55322/mdbakis.1170341
  14. Wu, S., Li, X., Du, X., & Li, Z. (2022). The impact of ESG performance on firm value: The moderating role of ownership structure. Sustainability, 14(21), 14507. https://doi.org/10.3390/su142114507
  15. Yu, X., & Xiao, K. (2022). Does ESG performance affect firm value? Evidence from a new ESG-scoring approach for Chinese enterprises. Sustainability, 14(24), 16940. https://doi.org/10.3390/su142416940
  16. Zheng, Y., Wang, B., Sun, X., & Li, X. (2022). ESG performance and corporate value: Analysis from the stakeholders' perspective. Frontiers in Environmental Science, 10, 1084632. https://doi.org/10.3389/fenvs.2022.1084632
  17. Almaqtari, F. A., Elsheikh, T., Tawfik, O. I., & Youssef, M. A. E.-A. (2022). Exploring the impact of sustainability, board characteristics, and firm-specifics on firm value: A comparative study of the United Kingdom and Turkey. Sustainability, 14(24), 16395. https://doi.org/10.3390/su142416395