Simultaneity issues
| Variable | Corporate profitability | |||
|---|---|---|---|---|
| (M1) | (M2) | (M3) | (M4) | |
| ROA | ROA | ROE | ROE | |
| ESGt−1 | 0.039*** (0.010) | 0.037*** (0.010) | 0.079*** (0.029) | 0.108*** (0.028) |
| Sizet−1 | – | −0.002*** (0.001) | – | −0.013*** (0.002) |
| Lev t-1 | – | −0.024*** (0.004) | – | −0.012 (0.011) |
| CFLOAt−1 | – | 0.114*** (0.007) | – | 0.219*** (0.017) |
| Growtht−1 | – | 0.015*** (0.001) | – | 0.038*** (0.003) |
| Aget−1 | – | −0.000 (0.001) | – | 0.001 (0.002) |
| Ind_Drt−1 | – | −0.004 (0.011) | – | 0.006 (0.028) |
| Boardt−1 | – | −0.004 (0.003) | – | −0.011 (0.010) |
| Top1t−1 | – | 0.012*** (0.004) | – | 0.044*** (0.012) |
| Dualityt−1 | – | 0.002 (0.001) | – | 0.004 (0.003) |
| Bgendert−1 | – | −0.025*** (0.004) | – | −0.039*** (0.011) |
| Liqt−1 | 0.021*** (0.004) | 0.003*** (0.001) | 0.003*** (0.001) | 0.001*** (0.000) |
| Constant | 0.039*** (0.10) | 0.082*** (0.017) | 0.012*** (0.002) | −0.065*** (0.006) |
| Year FE | Yes | Yes | Yes | Yes |
| Firm FE | Yes | Yes | Yes | Yes |
| Adjusted R2 | 0.014 | 0.092 | 0.005 | 0.055 |
| Obs | 303 | 303 | 303 | 303 |
| Variable | Corporate profitability | |||
|---|---|---|---|---|
| (M1) | (M2) | (M3) | (M4) | |
| ROA | ROA | ROE | ROE | |
| ESG | 0.039*** (0.010) | 0.037*** (0.010) | 0.079*** (0.029) | 0.108*** (0.028) |
| Size | – | −0.002*** (0.001) | – | −0.013*** (0.002) |
| Lev | – | −0.024*** (0.004) | – | −0.012 (0.011) |
| CFLOA | – | 0.114*** (0.007) | – | 0.219*** (0.017) |
| Growth | – | 0.015*** (0.001) | – | 0.038*** (0.003) |
| Age | – | −0.000 (0.001) | – | 0.001 (0.002) |
| Ind_Dr | – | −0.004 (0.011) | – | 0.006 (0.028) |
| Board | – | −0.004 (0.003) | – | −0.011 (0.010) |
| Top1 | – | 0.012*** (0.004) | – | 0.044*** (0.012) |
| Duality | – | 0.002 (0.001) | – | 0.004 (0.003) |
| Bgender | – | −0.025*** (0.004) | – | −0.039*** (0.011) |
| Liq | 0.021*** (0.004) | 0.003*** (0.001) | 0.003*** (0.001) | 0.001*** (0.000) |
| Constant | 0.039*** (0.10) | 0.082*** (0.017) | 0.012*** (0.002) | −0.065*** (0.006) |
| Year FE | Yes | Yes | Yes | Yes |
| Firm FE | Yes | Yes | Yes | Yes |
| Adjusted | 0.014 | 0.092 | 0.005 | 0.055 |
| Obs | 303 | 303 | 303 | 303 |
Note(s): This table presents results from the simultaneity approach, addressing potential endogeneity in the relationship between ESG and corporate profitability. The first-stage results in column M1 show the instrumented variable, ESG_L, while M2 reports the panel regression using the estimated ESG values. M3 and M4 examine the dynamic relationship by including a one-period lag for the independent and control variables. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively. Robust standard errors are reported in parentheses for all columns