Does ESG controversies score moderate the relationship between ESG factors and corporate financial performance in the healthcare industry in U.S.?

Abstract

In light of the pressing global challenges, ESG reporting has become crucial for large corporations to attract new investors. Since 2022, the regulatory authorities in the U.S. have proposed initiatives to strengthen ESG disclosure for companies that are listed on stock exchanges. This paper aims at analyzing the influence of ESG factors and Controversies (ESGC) on the Corporate Financial Performance (CFP) in the U.S. healthcare industry, focusing on the moderating role of ESG controversies. Based on a sample of 299 firms, this study employs the Ordinary Least Squares (OLS) regression analysis to study the relationship between ESG pillars scores and financial performance measures, including Tobin’s Q, stock return, and market capitalization. The findings show that the Environmental factor has a significant and positive relationship with market value, while the Social and Governance factors fail to show a positive relationship with CFP. Although ESG Controversies do not have a moderating effect on the relations between the ESG pillars and CFP, they negatively influence stock returns. The study underlines the importance of environmental concerns for healthcare organizations and the management of ESG controversies to increase market value and investors’ trust.