Forecasting the environmental, social, and governance rating of firms by using corporate financial performance variables: A rough set approach

Fernando García, Jairo González-Bueno, Francisco Guijarro, Javier Oliver

    Resultado de la investigación: Contribución a una revistaArtículorevisión exhaustiva

    12 Citas (Scopus)

    Resumen

    The environmental, social, and governance (ESG) rating of firms is a useful tool for stakeholders and investment decision-makers. This paper develops a rough set model to relate ESG scores to popular corporate financial performance measures. This methodology permits handling with information in an uncertain, ambiguous, and imperfect context. A large database was gathered, including ESG scores, as well as industry sector and financial variables for publicly traded European companies during the period 2013-2018. We carried out 500 simulations of the rough set model for different values in the discretization parameter and different grouping scenarios of firms regarding ESG scores. The results suggest that the variables considered are useful in the prediction of ESG rank when firms are clustered in three or four equally balanced groups. However, the prediction power vanishes when a larger number of groups is computed. This would suggest that industry sector and financial variables serve to find big differences across firms regarding ESG, but the significance of the model drops when small differences in ESG performance are scrutinized.

    Idioma originalInglés
    Número de artículo3324
    PublicaciónSustainability (Switzerland)
    Volumen12
    N.º8
    DOI
    EstadoPublicada - 1 abr. 2020

    Nota bibliográfica

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    © 2020 by the authors.

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