Márkus Martin

The relationship between the ESG score and operational risk in different risk categories

ESG scores contain information about a company's internal processes, and thus they can express the company's ability to manage operational risks. This study is the first to explain the frequency of occurrence and the size of the damage caused by different categories of operational risk events with the disclosure of ESG scores and the size of the scores among companies that suffered any operational risk event. To achieve this, I applied Heckman selection, fixed-effect logistic, and linear regression analysis to all operational risk events that occurred between 2012 and 2019 among publicly traded companies in the USA. The results show that companies with higher ESG scores have a greater likelihood of damage to physical assets, but the size of the damage decreases with an increase in ESG scores, particularly for events where there was some failure with customers, products, or business practices.

LXX. évf., 2023. July (746 - 771. O.), DOI:10.18414/KSZ.2023.7-8.746, Study

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