The Impact of Corporate Sustainability Performance on Firm Value Can the ESG Performance Improve the Firm’s Value?

Abstract

The responsibility of companies to reduce the harmful effects of climate change is evident. This research aims to investigate the impact of corporate sustainability performance on corporate fi-nancial performance and firms’ value of 47 listed pharmaceutical companies. Corporate sustain-ability performance was expressed by Sustaianalitics’s ESG Risk Ratings and their dimensions. The analysis of the relationship between sustainability and financial performance is based on the fi-nancial statements of listed pharmaceutical companies with the greatest market capitalization and available ESG risk rating between 2021-2022. The corporate financial performance has been ex-pressed in accounting measures by profitability ratios (ROA, ROE), and the firm's value was computed with Tobin's Q. The analysis was carried out with correlation analysis and linear re-gression using the R statistics system. Based on the coefficient of determination, there is a weak relationship between ESG dimensions and financial performance (OpROA) and strong relationship between ESG Risk ratings, capital structure, and investigated firms’ performance.