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The ESG Illusion: Disentangling Investor Trust from Firm Fundamentals

Sanjeev, Saanvi LU ; Lynch, Aria Marguerite LU and Filous, Katharina LU (2025) IBUH19 20251
Department of Business Administration
Abstract
This thesis aims to illustrate how Environmental, Social, and Governance (ESG) scores influence both shareholder perception of firm performance and actual firm performance within Emerging Market Multinational Enterprises (EMNEs). As sustainability becomes a priority in global markets, EMNEs are often subject to increased investor scrutiny due to distinctive challenges and standards present within their home markets. Building upon theories such as signalling theory, this study utilises a lagged fixed effects panel regression with data collected from 90 large-cap EMNEs across the Energy and Industrials sectors between the years 2019 and 2024. ESG performance, as an independent variable, is examined in relation to four key dependent... (More)
This thesis aims to illustrate how Environmental, Social, and Governance (ESG) scores influence both shareholder perception of firm performance and actual firm performance within Emerging Market Multinational Enterprises (EMNEs). As sustainability becomes a priority in global markets, EMNEs are often subject to increased investor scrutiny due to distinctive challenges and standards present within their home markets. Building upon theories such as signalling theory, this study utilises a lagged fixed effects panel regression with data collected from 90 large-cap EMNEs across the Energy and Industrials sectors between the years 2019 and 2024. ESG performance, as an independent variable, is examined in relation to four key dependent variables. These are stock price volatility, bid-ask spread, Tobin’s Q, and relative share price momentum. This study aims to assess whether strong ESG scores can positively influence shareholder perception of a firm, and whether this aligns with actual financial outcomes. The overall findings of this study suggest that ESG signalling may strengthen perceived performance, but falls short in reliably predicting firm performance for EMNEs. This research aims to contribute to the emerging discussion on ESG’s strategic relevance for companies seeking to establish themselves in developed markets, especially within sectors where environmental and social impact is more significant. (Less)
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author
Sanjeev, Saanvi LU ; Lynch, Aria Marguerite LU and Filous, Katharina LU
supervisor
organization
course
IBUH19 20251
year
type
M2 - Bachelor Degree
subject
keywords
emerging multinational enterprises, ESG scores, signaling theory, firm performance, shareholder perception, emerging economies, greenwashing, polluting industry
language
English
id
9205871
date added to LUP
2025-06-26 09:08:03
date last changed
2025-06-26 09:08:03
@misc{9205871,
  abstract     = {{This thesis aims to illustrate how Environmental, Social, and Governance (ESG) scores influence both shareholder perception of firm performance and actual firm performance within Emerging Market Multinational Enterprises (EMNEs). As sustainability becomes a priority in global markets, EMNEs are often subject to increased investor scrutiny due to distinctive challenges and standards present within their home markets. Building upon theories such as signalling theory, this study utilises a lagged fixed effects panel regression with data collected from 90 large-cap EMNEs across the Energy and Industrials sectors between the years 2019 and 2024. ESG performance, as an independent variable, is examined in relation to four key dependent variables. These are stock price volatility, bid-ask spread, Tobin’s Q, and relative share price momentum. This study aims to assess whether strong ESG scores can positively influence shareholder perception of a firm, and whether this aligns with actual financial outcomes. The overall findings of this study suggest that ESG signalling may strengthen perceived performance, but falls short in reliably predicting firm performance for EMNEs. This research aims to contribute to the emerging discussion on ESG’s strategic relevance for companies seeking to establish themselves in developed markets, especially within sectors where environmental and social impact is more significant.}},
  author       = {{Sanjeev, Saanvi and Lynch, Aria Marguerite and Filous, Katharina}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The ESG Illusion: Disentangling Investor Trust from Firm Fundamentals}},
  year         = {{2025}},
}