International Conference on Economics, Finance & Business, London

ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) REPORTING AND ITS IMPACT ON THE PROFITABILITY OF FINANCIAL TECHNOLOGIES FIRMS

MARCELLIN YOVOGAN

Abstract:

From the Global Reporting Initiative standards, European Union’s taxonomy, to the Sustainability Disclosure Standards, considerable efforts continue to be deployed to better understand the impacts of businesses on our society. Many studies examining the impact of ESG parameters on financial performance are focused mainly on the banking and manufacturing industries. The relationship between a firm’s profitability and the financial technologies businesses is less studied. The main objective of this paper is to contribute to covering this gap and to scrutinize the effect of the adoption of ESG parameters constraints on the profitability of Fintech firms. By applying a multiple regression on a sample of Fintech firms, we test the impact of the reporting and disclosures of ESG indicators on their financial results, which we measured by ROA (the return on assets) and Tobin’s Q. The findings did not show a direct relationship between the ESG reporting and disclosures and the ROA of Fintech companies. Surprisingly, we documented a negative relationship between the firms’ Tobin’s Q and their ESG scores. Although this research does not identify a direct impact on Fintech companies’ profitability, it contributes to the scientific debate on ESG reporting and disclosure and its impact on firm profitability measurements.

Keywords: ESG, Fintech, financial profitability, ROA