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Does Esg Drive Performance Or Does Performance Enable Esg? Evidence Of Reverse Causality From Korean Firms, Jiyeon Kim Ph.D., Wooyoung Yang Jul 1905

Does Esg Drive Performance Or Does Performance Enable Esg? Evidence Of Reverse Causality From Korean Firms, Jiyeon Kim Ph.D., Wooyoung Yang

Faculty Publications

The Environmental, Social, and Governance (ESG)-performance literature has grown substantially, yet a fundamental question remains underexplored: do ESG investments improve firm performance, or do high-performing firms simply invest more in ESG? We empirically address this question using panel vector autoregression with Granger causality tests on Korean listed firms rated by the Korea Corporate Governance Service (2013–2021), examining disaggregated ESG components alongside both financial performance and innovation outcomes. After controlling for firm and year fixed effects, we find no evidence that ESG improvements predict subsequent profitability or innovation within firms. However, profitability significantly predicts subsequent Environmental ESG investment, consistent with organizational …


Environmental Performance And Corporate Innovation: Evidence From Korea's Rapid Esg Institutionalization, Jiyeon Kim Ph.D., Wooyoung Yang Jul 1905

Environmental Performance And Corporate Innovation: Evidence From Korea's Rapid Esg Institutionalization, Jiyeon Kim Ph.D., Wooyoung Yang

Faculty Publications

Environmental performance has become strategically critical as regulators mandate disclosure, investors screen for ESG commitments, and consumers reward sustainable practices. Yet whether environmental performance enhances or constrains corporate innovation capacity remains contested. This study investigates this relationship using panel data from Korean listed firms during rapid ESG institutionalization. We employ two-way fixed-effects regression analysis to test whether environmental performance predicts R&D investment and knowledge capital accumulation. Results demonstrate robust positive associations between environmental performance and innovation. The association strengthens following institutional reforms, concentrating on knowledge-intensive sectors (manufacturing, finance) rather than operational sectors (retail, wholesale), and depends critically on resource availability. …