Board Characteristics and Sustainability Ratings of Multi-Business Groups: An evidence from Korean Conglomerates (Chaebols)

Abstract

The interest of Environmental, Social, and Governance (ESG) scores is increasing in both academic research and industry practices. 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 models, this study investigates a sample of the largest 41 Chaebol firms with a total of 246 observations during the period of 2014–2019. Our results showed that the governance score of the firm has a positive effect on financial performance. 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.