The nexus of ESG performance and equity financing: Evidence from JSE-listed non-financial firms in South Africa
Résumé
Type of the article: Research Article Abstract This study examines the relationship between Environmental, Social, and Governance (ESG) performance and equity financing among non-financial firms listed on the Johannesburg Stock Exchange (JSE) in South Africa. Using the data from Refinitiv Eikon, Bloomberg, and company sustainability reports, the research analyzes ESG and financial performance across multiple sectors, including manufacturing, retail, and mining, with a sample of 420 firm-year observations covering 60 firms over the period from 2015 to 2023. The results from System Generalized Method of Moments (GMM) model reveal that the Debt-to-Equity Ratio has a significant positive relationship with equity financing, highlighting the persistence of capital structure in financing decisions. Environmental Score demonstrates a significant positive effect on equity financing, indicating that better environmental performance attracts more investment, though this result was not significant in the Fixed Effects Model. Social Score consistently shows a positive impact across both models, reinforcing the importance of social performance in attracting equity capital. Governance practices also exhibit a significant influence on equity financing, emphasizing the role of effective governance in improving access to equity financing when considering dynamic factors. These findings suggest that ESG performance is a critical factor in equity financing decisions, and underscore the need for financial regulators, investment institutions, and industry bodies to raise awareness about the importance of ESG considerations. The study contributes to the growing literature on sustainable finance, illustrating the strategic importance of ESG factors in shaping investor preferences and enhancing market stability.
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