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Green gains: a case for South African-listed firms
This study investigates the impact of Environmental, Social, and Governance (ESG) performance on firm value and profitability for firms listed on the South Africa Stock Exchange from 2013 to 2021, using data from Bloomberg. To mitigate possible endogeneity, we utilized the two-stage least squares (2...
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| Format: | Thesis |
| Language: | English English |
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School of Economics
2025
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| _version_ | 1867613198814806016 |
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| access_status_str | Open Access |
| author | Gichanga, John Mwati |
| author2 | Karimu, Amin |
| author_browse | Gichanga, John Mwati Karimu, Amin |
| author_facet | Karimu, Amin Gichanga, John Mwati |
| author_sort | Gichanga, John Mwati |
| collection | Thesis |
| description | This study investigates the impact of Environmental, Social, and Governance (ESG) performance on firm value and profitability for firms listed on the South Africa Stock Exchange from 2013 to 2021, using data from Bloomberg. To mitigate possible endogeneity, we utilized the two-stage least squares (2SLS) regression model, using lagged ESG scores (L2), ESG- related bonuses, and executive compensation as instruments. Our findings reveal that strong ESG performance positively influences firm profitability, but negatively impacts firm value as measured by Tobin's Q. The study suggests that ESG can enhance a firm's efficiency in its current operations, but it does not significantly contribute to its value creation. Furthermore, the Governance dimension of ESG is not statistically significant in both Tobin's Q and ROA models. Fixed Effects Model (FEM) analysis yielded insignificant results, highlighting the potential effects of endogeneity and its consequences if not addressed. This research contributes to the literature on ESG and financial performance by demonstrating the effectiveness of using robust instrumental variables and controlling for unobserved time- varying factors to derive unbiased estimates. The insights gained from this study can inform policymakers, industry leaders, and academics about the strategic integration of ESG considerations into corporate and investment practices, ultimately fostering sustainable development and enhancing financial performance. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/42284 |
| institution | University of Cape Town (South Africa) |
| language | English eng |
| last_indexed | 2026-06-10T12:32:20.328Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2025 |
| publishDateRange | 2025 |
| publishDateSort | 2025 |
| publisher | School of Economics |
| publisherStr | School of Economics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/42284 Green gains: a case for South African-listed firms Gichanga, John Mwati Karimu, Amin Environmental, Social and Governance (ESG) Firm Value Profitability South Africa Stock Exchange Two-Stage Least Squares (2SLS) Endogeneity Tobin's Q ROA Fixed Effects Model (FEM) Instrumental Variables Corporate Financial Performance ESG Integration This study investigates the impact of Environmental, Social, and Governance (ESG) performance on firm value and profitability for firms listed on the South Africa Stock Exchange from 2013 to 2021, using data from Bloomberg. To mitigate possible endogeneity, we utilized the two-stage least squares (2SLS) regression model, using lagged ESG scores (L2), ESG- related bonuses, and executive compensation as instruments. Our findings reveal that strong ESG performance positively influences firm profitability, but negatively impacts firm value as measured by Tobin's Q. The study suggests that ESG can enhance a firm's efficiency in its current operations, but it does not significantly contribute to its value creation. Furthermore, the Governance dimension of ESG is not statistically significant in both Tobin's Q and ROA models. Fixed Effects Model (FEM) analysis yielded insignificant results, highlighting the potential effects of endogeneity and its consequences if not addressed. This research contributes to the literature on ESG and financial performance by demonstrating the effectiveness of using robust instrumental variables and controlling for unobserved time- varying factors to derive unbiased estimates. The insights gained from this study can inform policymakers, industry leaders, and academics about the strategic integration of ESG considerations into corporate and investment practices, ultimately fostering sustainable development and enhancing financial performance. 2025-11-20T13:13:45Z 2025-11-20T13:13:45Z 2025 2025-11-20T13:06:48Z Thesis / Dissertation Masters MCom http://hdl.handle.net/11427/42284 en eng application/pdf School of Economics Faculty of Commerce University of Cape Town |
| spellingShingle | Environmental, Social and Governance (ESG) Firm Value Profitability South Africa Stock Exchange Two-Stage Least Squares (2SLS) Endogeneity Tobin's Q ROA Fixed Effects Model (FEM) Instrumental Variables Corporate Financial Performance ESG Integration Gichanga, John Mwati Green gains: a case for South African-listed firms |
| thesis_degree_str | Master's |
| title | Green gains: a case for South African-listed firms |
| title_full | Green gains: a case for South African-listed firms |
| title_fullStr | Green gains: a case for South African-listed firms |
| title_full_unstemmed | Green gains: a case for South African-listed firms |
| title_short | Green gains: a case for South African-listed firms |
| title_sort | green gains a case for south african listed firms |
| topic | Environmental, Social and Governance (ESG) Firm Value Profitability South Africa Stock Exchange Two-Stage Least Squares (2SLS) Endogeneity Tobin's Q ROA Fixed Effects Model (FEM) Instrumental Variables Corporate Financial Performance ESG Integration |
| url | http://hdl.handle.net/11427/42284 |
| work_keys_str_mv | AT gichangajohnmwati greengainsacaseforsouthafricanlistedfirms |