In Zimbabwe, mining companies pose significant environmental, social and governance impacts. This paper investigates the nexus between ESG performance and financial performance of Zimbabwean listed mining companies. The mode of investigation is to establish whether the ESG systems affect the companies’ investment decision-making. This article used a quantitative research design. A sample of 25 mining companies listed on the Zimbabwe Stock Exchange was selected. The results show that there is a positive co-relationship between ESG performance and investment decisions by companies. This study contributes to the emerging literature on corporate ESG by highlighting the relationship between ESG performance and investment decisions in the mining sector in Zimbabwe.
Cite this paper
Madzoke, I. T. , Nyambe, H. K. , Malala, N. and Wu, J. (2024). Investigating the Relationship between ESG Performance and Financial Performance: Evidence from Listed Mining Companies in Zimbabwe. Open Access Library Journal, 11, e1542. doi: http://dx.doi.org/10.4236/oalib.1111542.
Huang, D.Z. (2021) Environmental, Social and Governance (ESG) Activity and Firm Performance: A Review and Consolidation. Accounting and Finance, 61, 335-360. https://doi.org/10.1111/acfi.12569
Hill, J. (2020) Environmental, Social, and Governance (ESG) Investing. https://www.researchgate.net/publication/338865384_Environmental_Social_and_Governance_ESG_Investing
Zhou, G., Liu, L. and Luo, S. (2022) Sustainable Development, ESG Performance and Company Market Value: Mediating Effect of Finan-cial Performance. Business Strategy and the Environment, 31, 3371-3387. https://doi.org/10.1002/bse.3089
Buhl, A., Kumari, P.S.R., Makhija, H. and Sharma, D. (2022) Exploring the Relationship of ESG Score and Firm Value Using Cross-Lagged Panel Analyses: Case of the Indian Energy Sector. Annals of Operations Research, 313, 231-256. https://doi.org/10.1007/s10479-021-04189-8
Govindan, K., Kannan, D. and Shankar, K.M. (2014) Evaluating the Drivers of Corporate Social Responsibility in the Mining Industry with Multi-Criteria Approach: A Multi-Stakeholder Perspective. Journal of Cleaner Production, 84, 214-232. https://doi.org/10.1016/j.jclepro.2013.12.065
Solomon, F., Katz, E. and Lovel, R. (2018) Social Dimensions of Mining: Research, Policy and Practice Challenges for the Minerals Industry in Australia. Resources Policy, 33, 142-149. https://doi.org/10.1016/j.resourpol.2008.01.005
Dutta, S., Lawson, R. and Marcinko, D. (2022) Para-digms for Sustainable Development: Implications of Management Theory. Corporate Social Responsibility and Environmental Management, 19, 1-10. https://doi.org/10.1002/csr.259
Hassan, A. and Ibrahim, E. (2021) Corporate Environmental Information Disclosure: Factors Influencing Companies’ Success in Attaining Environmental Awards. Corporate Social Responsi-bility and Environmental Management, 19, 32-46. https://doi.org/10.1002/csr.278
Kell, H.J., Robbins, S.B., Su, R. and Brenneman, M. (2018) A Psychological Approach to Human Capital. Wiley Online Library, Hoboken. https://doi.org/10.1002/ets2.12218
Gonzalez-Perez, M.A. and Leonard, L. (2017) The UN Global Compact. In: de Jonge, A. and Tomasic, R., Eds., Research Handbook on Transnational Corporations, Edward Elgar Publishing, Cheltenham, 117-138. https://doi.org/10.4337/9781783476916.00012
Osthoff, P. and Kempf, A. (2007) The Effect of Socially Responsible In-vesting on Portfolio Performance. European Financial Management, 13, 908-922. https://doi.org/10.1111/j.1468-036X.2007.00402.x
Cai, Y., Pan, C.H. and Statman, M. (2016) Why Do Countries Matter So Much in Corporate Social Performance? Journal of Corporate Finance, 41, 591-609. https://doi.org/10.1016/j.jcorpfin.2016.09.004
Hamilton, B.H., Papageorge, N.W. and Pande, N. (2019) The Right Stuff? Personality and Entrepreneurship. Quantitative Economics, 10, 643-691. https://doi.org/10.3982/QE748
Ku-mar, P. and Firoz, M. (2022) Does Accounting-Based Financial Performance Value Environmental, Social and Governance (ESG) Disclosures? A Detailed Note on a Corporate Sustainability Perspective. Australasian Accounting, Business and Finance Journal, 16, 41-72. https://doi.org/10.14453/aabfj.v16i1.4
Sayigili, E., Arslan, S. and Birkan, A.O. (2021) ESG Practices and Corpo-rate Financial Performance: Evidence from Borsa Istanbul. Borsa Istanbul Review, 22, 525-533. https://doi.org/10.1016/j.bir.2021.07.001
Chang, K., Cheng, X., Wang, Y., Liu, Q. and Hu, J. (2023) The Impacts of ESG Per-formance and Digital Finance on Corporate Financing Efficiency in China. Applied Economics Letters, 30, 516-523. https://doi.org/10.1080/13504851.2021.1996527
Ho, K.C., Li, H.M. and Gong, Y. (2022) How Does Corporate Social Performance Affect Investment Inefficiency? An Empirical Study of China Market. Borsa Istanbul Review, 22, 515-524. https://doi.org/10.1016/j.bir.2021.06.016
Wei, W., Kim, G., Miao, L., Behnke, C. and Almanza, B. (2018) Consumer Infer-ences of Corporate Social Responsibility (CSR) Claims on Packaged Foods. Journal of Business Research, 83, 186-201. https://doi.org/10.1016/j.jbusres.2017.10.046
Qi, S.Z. and Yin, J.B. (2019) Do Environmental Rights Trading Schemes In-duce Green Innovation? Evidence from Listed Firms in China. Economic Research Journal, 53, 129-143.
Raimi, N., De Nuccio, E., Giakoumelou, A., Petruzzella, F. and Vitolla, F. (2020) Non-Financial Information and Cost of Equity Capital: An Em-pirical Analysis. British Food Journal, 123, 49-65. https://doi.org/10.1108/BFJ-03-2020-0278
Saconi, L. and Antony, G. (2011) Social Capital, Corporate Social Responsibility, Economic Behavior and Performance. Palgrave Macmillan, New York. https://doi.org/10.1057/9780230306189
Wang, M. and Chen, Y. (2017) Does Voluntary Corporate Social Performance Attract Institutional Investment? Evidence from China. Corporate Governance: An International Review, 25, 338-357. https://doi.org/10.1111/corg.12205
Song, Y., Liu, Y.T. and Zhang, L.G. (2022) Heterogeneous Institutional In-vestors and Corporate Reputation: Social Responsibility: Intermediate Effect Test Based on Corporate Social Responsibility. Chi-nese Journal of Management Science, 30, 1-17.
Liu, Z. (2016) Does Corporate Environmental Responsibility Engagement Affect Firm Value? The Mediating Role of Corporate Innovation. Business Strategy and the Environment, 29, 1045-1055. https://doi.org/10.1002/bse.2416
Hai, M., Fang, Z. and Li, Z. (2022) Does Business Group’s Conscious of Social Responsibil-ity Enhance Its Investment Efficiency? Evidence from ESG Disclosure of China’s Listed Companies. Sustainability, 14, Article 4817. https://doi.org/10.3390/su14084817
Kao, J., Titman, S., Zhan, X. and Zhang, W. (2020) ESG Preference, Institu-tional Trading, and Stock Return Patterns. National Bureau of Economic Research, Cambridge, No. W28156.
Refinitiv (2022) Environmental, Social and Governance Scores, Brochure on Refinitiv Website. https://www.refinitiv.com/content/dam/marketing/en_us/documents/methodology/refinitiv-esg-scoresmethodology.pdf
Lo, K.Y. and Kwan, C.L. (2017) The Effect of Environmental, Social, Governance and Sustainability Initiatives on Stock Value—Examining Market Response to Initiatives Undertaken By Listed Companies. Corporate Social Re-sponsibility and Environmental Management, 24, 606-619. https://doi.org/10.1002/csr.1431
Billio, M., Costola, M., Hris-tova, I., Latino, C. and Pelizzon, L. (2021) Inside the ESG Ratings: (Dis)agreement and Performance. Corporate Social Responsibil-ity and Environmental Management, 28, 1426-1445. https://doi.org/10.1002/csr.2177
Landin, G. and Scirelli, M. (2019) Towards a More Ethical Market: the Impact of ESG Rating on Corporate Financial Performance. Social Responsibility Journal, 15, 11-27. https://doi.org/10.1108/SRJ-11-2017-0254
Bhattacharya, S. and Sharma, D. (2019) Do Environment, Social and Governance Performance Impact Credit Ratings: A Study from India. International Journal of Ethics and Systems, 35, 466-484. https://doi.org/10.1108/IJOES-09-2018-0130
Zhu, J., Ye, K., Tucker, J.W. and Chan, K. (2021) Board Hierarchy, Independ-ent Directors, and Firm Value: Evidence from China. Journal of Corporate Finance, 41, 262-279. https://doi.org/10.1016/j.jcorpfin.2016.09.009
Giannopoulos, G., Fagernes, R.V.K., Elmarzouky, M. and Hossain, K.A.B.M.A. (2022) The ESG Disclosure and the Financial Performance of Norwegian Listed Firms. Journal of Risk and Financial Management, 15, Article 237. https://doi.org/10.3390/jrfm15060237 https://www.jstor.org/stable/27032607
Lopez-de-Silenus, F., McCahery, J.A. and Pudschedl, P.C. (2020) ESG Performance and Disclosure: A Cross-Country Analysis. Singapore Journal of Legal Studies, 217-241. https://doi.org/10.2139/ssrn.3505376
Velte, P. (2017) Does ESG Performance Have an Impact on Financial Performance? Evidence from Germany. Journal of Global Responsibility, 8, 169-178. https://doi.org/10.1108/JGR-11-2016-0029
Yoon, B., Lee, J. and Byun, R. (2018) Does ESG Performance Enhance Firm Value? Evidence from Korea. Sustainability, 10, Article 3635. https://doi.org/10.3390/su10103635
Zhao, C., Guo, Y., Yuan, J., Wu, M., Li, D., Zhou, Y. and Kang, J. (2018) ESG and Corpo-rate Financial Performance: Empirical Evidence from China’s Listed Power Generation Companies. Sustainability, 10, Article 2607. https://doi.org/10.3390/su10082607
Xie, J., Nozawa, W., Yagi, M., Fujii, H. and Managi, S. (2019) Do Environmen-tal, Social, and Governance Activities Improve Corporate Financial Performance? Business Strategy and the Environment, 28, 286-300. https://doi.org/10.1002/bse.2224
Bhaskaran, R.K., Ting, I.W.K., Sukumaran, S.K. and Sumod, S.D. (2020) Envi-ronmental, Social and Governance Initiatives and Wealth Creation for Firms: An Empirical Examination. Managerial and Decision Economics, 41, 710-729. https://doi.org/10.1002/mde.3131
De Lucia, C., Pazienza, P. and Bartlett, M. (2020) Does Good ESG Lead to Better Financial Performances by Firms? Machine Learning and Logistic Regression Models of Public Enterprises in Europe. Sustainability, 12, Article 5317. https://doi.org/10.3390/su12135317
Naeem, M., Ullah, H., Shahid, J. and Ka-kakhel, S.J. (2022) The Impact of ESG Practices on Firm Performance: Evidence from Emerging Countries. Indian Journal of Economics and Business, 20, 731-750.
Ahmad, N., Mobarek, A., Roni, N.N. and Tan, A.W.K. (2021) Revisiting the Impact of ESG on Financial Performance of FTSE350 UK Firms: Static and Dynamic Panel Data Analysis. Cogent Business & Management, 8, Article ID: 1900500. https://doi.org/10.1080/23311975.2021.1900500
Han, J.J., Kim, H.J. and Yu, J. (2016) Empirical Study on Relationship between Corporate Social Responsibility and Financial Performance in Korea. Asian Journal of Sustainabil-ity and Social Responsibility, 1, 61-76. https://doi.org/10.1186/s41180-016-0002-3
Attan, R., Alam, M.M., Said, J. and Zamri, M. (2019) The Impacts of Environmental, Social, and Governance Factors on Firm Performance: Panel Study of Malaysian Companies. Management of Environmental Quality, 29, 182-194. https://doi.org/10.31235/osf.io/ntz52
Alshehhi, A., Nobanee, H. and Khare, N. (2018) The Impact of Sustainability Practices on Corporate Financial Performance: Literature Trends and Future Research Potential. Sustainability, 10, Article 494. https://doi.org/10.3390/su10020494
Duque-Grisales, E. and Aguilera-Caracuel, J. (2019) Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilaterals: Moderating Effects of Geographic International Diversification and Financial Slack. Journal of Business Ethics, 168, 315-334. https://doi.org/10.1007/s10551-019-04177-w
Lindman, Å., Ranängen, H. and Kauppila, O. (2020) Guiding Corporate So-cial Responsibility Practice for Social License to Operate: A Nordic Mining Perspective. The Extractive Industries and Society, 7, 892-907. https://doi.org/10.1016/j.exis.2020.07.013
Van Zanten, J.A. and Tulder, R. (2018) Multinational Enterprises and the Sustainable Development Goals: An Institutional Approach to Corporate Engagement. Journal of International Business Policy, 1, 208-233. https://doi.org/10.1057/s42214-018-0008-x
O’connell, M. and Ward, A.M. (2020) Shareholder The-ory/Shareholder Value. In: Idowu, S., Schmidpeter, R., Capaldi, N., Zu, L., Del Baldo, M. and Abreu, R., Eds., Encyclopedia of Sus-tainable Management, Springer, Cham, 1-7. https://doi.org/10.1007/978-3-030-02006-4_49-1
Hubbard, R.G. and Bhagat, S. (2020) Should the Modern Corporation Maximize Shareholder Value? https://econpapers.repec.org/RePEc:aei:journl:y:2020:id:1008578216
Adegbite, O.O. and Machethe, C.L. (2020) Bridg-ing the Financial Inclusion Gender Gap in Smallholder Agriculture in Nigeria: An Untapped Potential for Sustainable Develop-ment. World Development, 127, Article ID: 104755. https://doi.org/10.1016/j.worlddev.2019.104755
Unerman, J., Bebbington, J. and O’Dwyer, B. (2018) Corporate Reporting and Accounting for Externalities. Accounting and Business Research, 48, 497-522. https://doi.org/10.1080/00014788.2018.1470155
Donaldson, T. and Preston, L.E. (1995) The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. Academy of Management Review, 20, 65-91. https://doi.org/10.2307/258887
Cerioni, E., D’Andrea, A., Giuliani, M. and Marasca, S. (2021) Non-Financial Disclosure and Intra-Industry Comparability: A Macro, Meso and Micro Analysis. Sustainability, 13, Article 1177. https://doi.org/10.3390/su13031177
Cucari, N., Esposito De Falco, S. and Orlando, B. (2021) Diversity of Board of Direc-tors and Environmental Social Governance: Evidence from Italian Listed Companies. Corporate Social Responsibility and Envi-ronmental Management, 25, 250-266. https://doi.org/10.1002/csr.1452
Sharfman, B. (2014) Shareholder Wealth Maximization and Its Implementation under Corporate Law. Florida Law Review, 66, Article 7. https://doi.org/10.2139/ssrn.2129376 https://scholarship.law.ufl.edu/flr/vol66/iss1/7
Clarke, A. and Crane, A. (2018) Cross-Sector Partnerships for Systemic Change: Systematized Literature Review and Agenda for Further Research. Jour-nal of Business Ethics, 150, 303-313. https://doi.org/10.1007/s10551-018-3922-2
Zeidner, M., Matthews, G. and Roberts, R.D. (2012) The Emotional Intelligence, Health, and Well-Being Nexus: What Have We Learned and What Have We Missed? Ap-plied Psychology: Health and Well-Being, 4, 1-30. https://doi.org/10.1111/j.1758-0854.2011.01062.x
Chan, C.Y., Chou, D.W. and Lo, H.C. (2017) Do Financial Constraints Matter When Firms Engage in CSR? The North American Journal of Economics and Finance, 39, 241-259. https://doi.org/10.1016/j.najef.2016.10.009
Shakil, M.H., Mahmood, N., Tasnia, M. and Munim, Z.H. (2019) Do Environmental, Social and Governance Performance Affect the Financial Performance of Banks? A Cross-Country Study of Emerging Market Banks. Management of Environmental Quality, 30, 1331-1344. https://doi.org/10.1108/MEQ-08-2018-0155
Goodwell, J.W., Kumar, S., Rao, P. and Verma, S. (2023) Emotions and Stock Market Anomalies: A Systematic Review. Journal of Behavioral and Experimental Finance, 37, Article ID: 100722. https://doi.org/10.1016/j.jbef.2022.100722
Aydogmus, M., Gulay, G. and Ergun, K. (2022) Impact of ESG Performance on Firm Value and Profitability. Borsa Istanbul Review, 22, S119-S127. https://doi.org/10.1016/j.bir.2022.11.006
Cai, Z., Qian, M. and Wang, L. (2023) Comprehensive ESG Score and Financial Performance of Carbon-Neutral Concept Enterpris-es—Based on Entropy Weight-TOPSIS and Grey Relational Analysis. Open Journal of Business and Management, 11, 133-148. https://doi.org/10.4236/ojbm.2023.111008