Document Type: Original Research Paper
Management Department, Universitat Politècnica de València, Spain
Faculty of Social Sciences. University of Castilla-La Mancha, Spain
Faculty of Economics and Business Studies. University of Castilla-La Mancha, Spain
Over the past years there has been a significant growth in corporate reporting of environmental,
social and corporate governance (ESG) factors. This study assesses whether ESG ratings are related to firm
performance. Through a multivariate analysis we have confirmed differences between the ESG scores used to
evaluate environmental, social and corporate governance factors of rated companies. We checked that although there is a significant correlation between them, companies do not rank equally and therefore their economic results might vary among the indicators. We found that selected US companies in the bottom 25% (Worst In Class, termed WIC) of their industries according to ESG scores perform significantly better than those in the top 25%, (Best In Class, termed BIC). We also found that BIC companies have significant higher revenue per employee and cash flow per share compared the industry medians. Attending to these results, it seems that extreme strategies on ESG issues produce better economic results than those strategies that are in line with the industry.