{"title":"Distinctive impacts of ESG pillars on corporate financial performance: A random forest analysis of Korean listed firms","authors":"Yangsoo Jin","doi":"10.1016/j.frl.2024.106395","DOIUrl":null,"url":null,"abstract":"<div><div>This study investigates the distinct effects of the environmental, social, and governance (ESG) pillars on corporate financial performance (CFP) measured by ROE and ROA. Using a random forest regression on a sample of Korean-listed firms, we address the positive correlations among these pillars and explore the nonlinear relationships between CFP and individual pillars without pre-specified functional forms. The findings indicate that both environmental and governance performances positively affect CFP, with environmental performance having a more substantial impact but diminishing returns at higher levels. Social performance negatively affects CFP. The environmental pillar emerges as the most reliable predictor of CFP.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106395"},"PeriodicalIF":7.4000,"publicationDate":"2024-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1544612324014247","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study investigates the distinct effects of the environmental, social, and governance (ESG) pillars on corporate financial performance (CFP) measured by ROE and ROA. Using a random forest regression on a sample of Korean-listed firms, we address the positive correlations among these pillars and explore the nonlinear relationships between CFP and individual pillars without pre-specified functional forms. The findings indicate that both environmental and governance performances positively affect CFP, with environmental performance having a more substantial impact but diminishing returns at higher levels. Social performance negatively affects CFP. The environmental pillar emerges as the most reliable predictor of CFP.
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