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Firm value, ownership structure, and strategic approaches to ESG activities

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Abstract

The strategic role of environmental, social, and governance (ESG) activities in firm performance has recently drawn increasing attention. In particular, the dynamics of ESG management in family-owned firms have become a crucial factor in increasing firm value. Using novel data from Korea, a suitable context for our analysis, we focus on the interplay between ESG investment and family ownership. Our results reveal that ESG activities can mitigate the agency problems inherent in family ownership, but their careful management is essential for maximizing firm value. We introduce the concept of the marginal effect of ESG, decompose its factors, and identify a critical threshold of family ownership that is instrumental for increasing firm value through ESG activities. Depending on a firm’s position relative to this threshold, we recommend strategies to increase or reduce ESG investment, showing that the timing of such investment or disinvestment in ESG activities emerges as a key strategic consideration. Our findings provide practical insights for family-owned firms to make informed decisions on ESG investment, thereby contributing not only to their own sustainability but also the long-term vitality of ESG activities.

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Data availability

The datasets generated and analyzed during the current study are available in the TS2000 data warehouse, which we accessed under an agreement with Pusan National University. [https://www.kocoinfo.com/].

Notes

  1. On the climate and environmental issues and their economic consequences, see J. Kim, Park, and Ryu (2017a, 2017b), Park, Kim, and Ryu (2022), Yang, Bae, and Ryu (2022), and Yang, Bae, and Ryu (2023), among others.

  2. About the characteristics the Korean financial market, listed firms, and economy, refer to the studies of Chun, Cho, and Ryu (2020), Kim, Cho, and Ryu (2023), Kim, and Ryu (2021), K. Kim and Ryu (2022a, 2022b), Y. Kim and Ryu (2022a, 2022b), Kim, Ryu, and Yang (2019, 2021a, 2021b), Kim, Ryu, and Yu (2021a, 2021b), Kim, Ryu, and Yu (2022), Park and Ryu (2021), Seok, Cho, and Ryu (2019, 2021, 2022), Song and Ryu (2021), Ryu, Yang, and Yu (2022), Ryu et al., (2022a, 2022b), Ryu and Yu (2020, 2021), Ryu et al., (2020a, 2020b), Ryu et al., (2020a, 2020b), and Yu and Ryu (2021).

  3. TS2000 data is available from the website of the Korean Companies Information (KOCOINFO; https://www.kocoinfo.com).

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Funding

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2022S1A5B5A16056785).

Author information

Authors and Affiliations

  1. Business School, Pusan National University, 63-2 Busandaehak-ro, Geumjeong-gu, Busan, 46241, Republic of Korea

    Hyun-Jung Nam

  2. Faculty of Political Sciences, Istanbul Medeniyet University, Istanbul, Turkey

    Mehmet Huseyin Bilgin

  3. Department of Economics, Sungkyunkwan University, 25‐2 Sungkyunkwan‐ro, Jongno‐gu, Seoul, 03063, Republic of Korea

    Doojin Ryu

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  1. Hyun-Jung Nam
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  2. Mehmet Huseyin Bilgin
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  3. Doojin Ryu
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Correspondence to Doojin Ryu.

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Nam, HJ., Bilgin, M.H. & Ryu, D. Firm value, ownership structure, and strategic approaches to ESG activities. Eurasian Bus Rev 14, 187–226 (2024). https://doi.org/10.1007/s40821-024-00252-z

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