|SASAKI Takafumi (Chuo University) / HANAEDA Hideki (Hitotsubashi University)
|February 2021 21-J-004
|Frontiers in Corporate Governance Analysis
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How does investment in socially responsible activities influence shareholder value? We conduct a survey on the effects of ESG programs on financial performance in Japanese firms to address this important question. We find that Japanese firms believe that enhancing ESG performance results in increases in future profits. Furthermore, the impact of ESG on mitigating uncertainty of future profits is more important than the impact on increasing profits. We also find that large firms value the impacts of ESG more than small firms do. Although these findings are partially affected by self-selection issues, we argue that firms engage in ESG programs to enhance long-term shareholder value rather than sacrificing profits. We also find that respondents expect that enhancements in ESG have a positive impact on stakeholders' behavior, which will in turn increase shareholder value.