Cross-Sector Analysis of ESG Factors Impact on Company Performance

The growing interest in ESG-related issues is spreading throughout investors, companies and individuals paying their attention to factors that previously remained insignificant in association with company performance. The purpose of the study is to investigate the impact of different ESG factors on the performance of companies belonging to various industry sectors. The author analyzed the panel data for 1042 US companies operating in eight economic sectors from 2016 to 2022. The dependent variables are ROA and Tobin’s Q as indicators of financial and market performance, the explanatory variables are different components of ESG score. Fixed-effect panel regression and endogeneity analysis are conducted to obtain the results. The main findings of the study indicate that general ESG impact is significant and positive in most cases but is better visualized with market performance. Furthermore, those ESG factors, related to Social pillar, are the most significant in determining both market and financial efficiency. Simultaneously, the relationship direction as well as its effect differs across economic sectors. The study provides investors, shareholders and company management with sector insights, deepening the understanding of ESG factors impact, contributing to reasonable and efficient decision-making.