Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Efects of Geographic International Diversifcation and Financial Slack

This paper examines whether a frm’s fnancial performance (FP) is associated with superior environmental, social and governance (ESG) scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the ESG score and FP is signifcantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating efect of fnancial slack and geographic international diversifcation on the relationship between ESG dimensions and frms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. Keywords Environmental, social and governance dimensions · ESG performance · ESG score · Financial performance · Geographic international diversifcation · Financial slack · Emerging market multinationals · Multilatinas