Do the ESG scores help to select the most successful companies?

  • Serge Evraert University of Bordeaux-IRGO
  • Frédérique Bardinet - Evraert University of Bordeaux- IRGO
Keywords: Environmental score, Social score, Corporate governance score, socially responsible fund, most successful companies


Financial performance, the main purpose for the investors, is easily measured by financial reporting. On the other hand, its numerous causes, for example the combination of the knowledge and the acts of the employees of the company, remain anonymous and are not reported. This article uses the ESG scores measured by financial analysts and portfolio managers of a French SRI fund to assess the respective influences of environmental, social, governance activities in order to select the most successful companies. For that, these scores are combined with a set of financial indicators of 143 European listed companies, collected from the database of the SRI Fund. The Companies are followed over a period of 5 years. Governance scores are significant but not those related to the environment and social activities. In order to explain the discriminant power of governance, its scores are broken down into sub-scores. The tests are significant for financial communication: the reliability of published information, the transparency, quality and stability of the management team as well as for organizational characteristics such as the separation of tasks and the quality of internal control. The results confirm the classification of companies in the two chosen categories which differ in their level of financial performance. The results suggest that governance activities are highly valued by financial analysts. This should encourage business leaders and their teams to put in place an effective governance policy. The argument is equally strong   for practitioners, especially portfolio managers, who should not underestimate governance issues in their search of the most successful companies.   


Download data is not yet available.

Author Biographies

Serge Evraert , University of Bordeaux-IRGO

Emeritus Professor, University of Bordeaux-IRGO, France

Frédérique Bardinet - Evraert, University of Bordeaux- IRGO

Phd,, Associate Professor, University of Bordeaux- IRGO, France


Accenture. (2006). The High-Performance Workforce Study. In.

Attig, N., El Ghoul, S., Guedhami, O., and Suh, J. (2013). Corporate Social Responsibility and Credit Ratings. Journal of Business Ethics, 117, 679-694.

Banker, R. D., and R. Mashruwala.(2007). The moderating role of competition in the relationship between nonfinancial measures and future financial performance. Contemporary Accounting Research 24 (3): 763–793.

Barth, M. E., & McNichols, M. F. (1994). Estimation and market valuation of environmental liabilities relating to superfund sites. Journal of Accounting Research, 32(3), 177–209

Bebchuk, L. A., Cohen,A. Wang, C.Y. (2013) Learning and the disappearing association between governance and returns, Journal of Financial Economics, 108,323-348.

Berthelot, S., Morris, T., and Morrill, C. (2010). Corporate governance rating and financial performance: a Canadian study. Corporate Governance: The International Journal of Effective Board Performance, 10, 635-646.

Brammer, S., Millington, A., & Rayton, B. (2007). The contribution of corporate social responsibility to organizational commitment.The International Journal of Human Resource Management, 18(10), 1701–1719.

Branco, M. C., and Rodrigues, L. L. (2006). Corporate social responsibility and resource based perspectives. Journal of Business Ethics, 69(2), 111–132.

Capon, N., Farley, J., Hoenig, S., (1990) Determinants of financial performance: a meta-analysis. Management Science, 36. (10) 1143-1159.

Chatterji, A., Levine, D. I.,and Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics and Management Strategy, 18(1), 125–169.

Chatterji, A.,Durand R, Levine, D.,and Touboul S (2016). Do ratings of firms converge? Implications for managers , investors ans strategy researchers, Strategic Management Journal,(37(8), 1597-1614.

Clarkson, P. M., Fang, X., Li, Y.,Richardson,G. (2013) The relevance of environmental disclosures: Are such disclosures incrementally informative? Journal of Accounting and public policy, 32, 410-431.

Clemens, B., and Bakstran, L. (2010). A framework of theoretical lenses and strategic purposes to describe relationships among firm environmental strategy, financial performance, and environmental performance. Management Research Review, 33, 393-405.

Cochran, Philip L. and Robert A. Wood. 1984. Corporate Social Responsibility and Financial Performance. The Academy of Management Journal 27(1): 42-56.

Collins, J. C., and Porras, J. I. (1994). Built to Last: Harper Collins Publishers.

De Waal A. (2012), Characteristics of high performance organizations, Journal of Management Research, Vol. 4, No. 4, 39-71.

Delmas, M. A., Etzion, D., and Nairn-Birch, N. (2013). Triangulating Environmental Performance : What Do Corporate Social Responsibility Ratings Really Capture ? . Academy of Management Perspectives, 27, 255-267.

Dhaliwal, D., O. Z. Li, A. Tsang, and G. Y. Yang. 2011. Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review 86(1): 59–100.

Dhaliwal, D., S. Radhakrishnan, A. Tsang, and G. Y. Yang.( 2012). Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure. The Accounting Review 87(3): 723–759.

Edmans, A. (2011). Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices. Journal of Financial Economics 101 (3): 621-640.

Fairchild, R. J. (2008). The manufacturing sector’s environmental motives: A game-theoretic analysis. Journal of Business Ethics,79, 333–344.

Frigo, M., Needles, B., and Powers, M. (2002). Strategy and financial ratio performance measures. Performance measurement and management control, 13, 341-359.

Gebhardt W R, Lee C.M.C, Swaminathan B (2002), Toward an implied cost of capital, Journal of Accounting Research, vol 39, p135-176.

Guenster, N., Bauer, R., Derwall, J., Koedijk K. (2011). The Economic Value of Corporate Efficiency. European Financial Management, 17 (4),679-704.

HalbritterG., Dorfleitner,G, The wages of social responsibility,- where are they? A critical review of ESG investing. , 25-35, 26(2015)

Hatch, N. W., and Dyer, J. H. (2004). Human capital and learning as a source of sustainable competitive advantage. Strategic Management Journal, 25, 1155-1178.

Hasseldine, J., Salama, A. I., & Toms, J. S. (2005). Quantity versus quality: The impact of environmental disclosures on the reputations of UK plcs. British Accounting Review, 37(2), 231–248.

Hussainey, K., and Salama, A. (2010). The importance of corporate environmental reputation to investors. Journal of Applied Accounting Research, 11(3), 229–241.

Isaksson, L.E. and Woodside, A.G. (2016). Modeling firm heterogeneity in corporate social performa nce and financial performance. Journal of Business Research,

Johnson, R. A., and Greening, D. W. (1999). The effects of corporate governance and institutional ownership types of corporate social performance. Academy of Management Journal, 42, 564-576.

Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler. (1986). Fairness and the Assumptions of Economics. Journal of Business 59(4): S285-S300.

Kirby, J. (2005). Toward a Theory of High Performance. Harvard Business Review, 83, 30-39.

Kor, Y. Y., and Leblebici, H. (2005). How Do Interdependencies Among Human Capital - Capital Deployment, Development, and Diversification Strategies Affect Firms' Financial Performance ? Strategic Management Journal, 26, 967-985.

Lev, Baruch, Christine Petrovits, and Suresh Radhakrishnan. 2010. Is Doing Good Good for You? How Corporate Charitable Contributions Enhance Revenue Growth. . Strategic Management Journal 31: 182-200.

Lyon, T. P., and Maxwell, J. W. (2008). Corporate social responsibility and the environment: A theoretical perspective. Review of Environmental Economics and Policy, 1, 1–22.

Madden, B. J. (1999). CFROI Valuation. Oxford: Butterworth Heinemann.

Magness, V. (2009). Environmental disclosure in the mining industry: A signaling paradox? Advances in Environmental Accounting and Management, 4, 55–81.

Malik,M. (2014). Value –Enhancing Capabilities of CSR: A Brief Review of Contemporary Literature. Journal of Business Ethics, Jan., 46p.

Managi, S., Okimoto, T., and Matsuda, A. (2012). Do socially responsible investment indexes outperform conventional indexes? Applied Financial Economics, 22, 1511-1527.

Margulis, J.D.,Helfenbein,H.A., Walsh., J.P. (2009) . Does it pay to be good… and does it matter? A meta-analysis of the relationship between corp.orate social and financial performance

Meng-Ling, W. (2006). Corporate Social Performance, Corporate Financial Performance, and Firm Size: A Meta-Analysis. Journal of American Academy of Business, Cambridge, 8, 163-171.

Moneva, J. M., and Ortas, E. (2010). Corporate environmental and financial performance: a multivariate approach. Industrial Management and Data Systems, 110, 193-210.

Mozaffar, K, Serafeim, G., Yoon, A. (2015). Corporate sustainability: first evidence on materiality. Harvard Business School Working Paper, N° 15-073, March.

Needles, B. E., Frigo, M. L., and Powers, M. (2002). Strategy and Financial Ratio Performance Measures: The Case of An Emerging Economy. Indian Accounting Review 6, No 2.

Needles, B. E., Powers, M., Shigaev, A., and Frigo, M. L., (2008) Performance Measurement and Executive Compensation:: Practices of High Performance companies. In M. Epstein and J. Manzoni (Eds.),Performance Measurement and Management Control and Society: Studies in Managerial and FinancialAccounting,(Forthcoming). London: JAI Elsevier Science Ltd.

Needles, B. E., Powers, M., Shigaev, A., and M.L., F. (2010). Strategy and integrated financial ratio performance measures: a longitudinal multi-country study of high performance companies. In M. Epstein (Ed.), Studies in Managerial and Financial Accounting (Vol. 20, pp. 211–252): London: Emerald Group Publishing Ltd.

Nollet,J., Filis,G. Mitrokostas,E.,(2015). Corporate social responsability and Financial performance ; A non-linear and disagreggated approach.

Ooi, E., and Lajbcygier, P. (2013). Virtue Remains After Removing Sin: Finding Skill Amongst Socially Responsible Investment Managers. Journal of Business Ethics, 113, 199-224.

Orlitzky, M. (2008). Corporate social performance and financial performance: A research synthesis. In A. Crane, A. McWilliams,

Orlitzky, M., Schmidt, F. L., and Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441.

Orlitzky, M. (2013). Corporate Social Responsibility, Noise, and Stock Market Volatility. The Academy of Management Perspectives, 27, (3) 238-254.

Pava, M. and Krausz, J. (1993). The Association Between Corporate Social Responsibility and Financial Performance: The Paradox of Social Cost. Journal of Business Ethics 15(3): 321-357.

Posnikoff, Judith F. (1997). Disinvestment from South Africa: They Did Well By Doing Good. Contemporary Economics Policy 15 (1): 76-86.

Prior, D., J. Surroca, and J. Tribo. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An International Review 16(3): 160-177.

Rathner, S. (2013). The Influence of Primary Study Characteristics on the Performance Differential Between Socially Responsible and Conventional Investment Funds: A Meta-Analysis. Journal of Business Ethics, 118, 349-363.

Renneboog, L., Horst,J. T., Zhang,C., ( 2008). Socially responsible investments: Institutional aspects, performance and investment behaviour, Journal of Banking and Finance 32, 1723-1742.

Roberts, Peter W. and Grahame R. Dowling. (2002), Corporate Reputation and Sustained Superior Financial performance, Strategic Management Journal 23: 1077-1093.

Schnietz, K.E. and Epstein, M.J.: (2005), “Exploring the financial value of a reputation for corporate social responsibility during a crisis”, Corporate Reputation Review 47(4), 327-345.

Scott,W.R., Financial Accounting Theory,3rd ed. Prentice Hall,2003,chap.5, p.138.

Shrader, R., and Siegel, D. S. (2007). Assessing the Relationship between Human Capital and Firm Performance: Evidence from Technology-Based New Ventures. Entrepreneurship: Theory and Practice, 31, 893-908.

Surroca, J., and Tribó, J. A. (2008). Managerial Entrenchment and Corporate Social Performance. Journal of Business Finance and Accounting, 35, 748-789.

Surroca, J., Tribo´, J. A., and Waddock, S. (2010). Corporate responsibility and financial performance: The role of intangible resources. Strategic Management Journal, 31(5), 463–90.

Upadhyay, A., Bandyopadhyay, G., and Dutta, A. (2012). Forecasting Stock Performance in Indian Market using Multinomial Logistic Regression. Journal of Business Studies Quarterly, 3, 16-39.

Toms, J. S. (2002). Firm resources, quality signals and the determinants of corporate environmental reputation: Some UK evidence.British Accounting Review, 34(3), 257–282.

Vitaliano, D. F. (2010). Corporate social responsibility and labor turnover. Corporate Governance, 10(5), 563–573.

How to Cite
Serge Evraert, & Frédérique Bardinet - Evraert. (2019). Do the ESG scores help to select the most successful companies?. IJRDO - Journal of Business Management (ISSN: 2455-6661), 5(7), 01-22. Retrieved from