ESG Performance and Market Capitalization of Industries in the BRICS Region: The Mediating Role of Cost of Equity

Yahao Deng; Prince Asare Vitenu-Sackey; Zhengrong Yang; Xintong Liu

doi:10.5755/j01.ee.36.5.39825

Authors

Yahao Deng School of Financial Management, Chongqing Business Vocational College, China https://orcid.org/0009-0002-9718-0951
Prince Asare Vitenu-Sackey Department of Economics, Strathclyde Business School, University of Strathclyde, United Kingdom https://orcid.org/0000-0001-8324-6521
Zhengrong Yang School of Finance and Economics, Jiangsu University, China https://orcid.org/0009-0007-8353-7127
Xintong Liu School of Finance and Economics, Jiangsu University, China

DOI:

https://doi.org/10.5755/j01.ee.36.5.39825

Keywords:

ESG Performance, Market Capitalisation, Cost of Equity, BRICS, Market Value

Abstract

The evaluation of environmental, social, and governance performance is a component of investment portfolio analysis that aids in the identification of potential risks and opportunities. The paper investigates the relationship between ESG performance and market capitalisation, with a keen interest in the mediating role of the cost of equity. The study focuses on industries in the BRICS region with a sample of 78 individual industries streamlined from 144 specific sectors across Brazil, Russia, India, China, and South Africa from 2019 to 2023. We use robust and flexible econometric methods that account for homoskedasticity, heteroskedasticity, multicollinearity, cross-sectional heterogeneity, and cross-sectional dependence. We find that the impact of ESG performance on market capitalization is positive and significant, irrespective of industry-specific and country-specific characteristics. Moreover, the relationship is linear but not non-linear, except for the mediating role of the cost of equity. We established an inverted U-shape curve relationship between the cost of equity and market capitalization.

Author Biographies

Yahao Deng, School of Financial Management, Chongqing Business Vocational College, China

Yahao Deng is an associate professor and deputy director at the Department of Accounting and Finance, Chongqing Business Vocational College. Her main research direction is in the field of finance and accounting. She has published more than 30 articles and presided over more than 10 projects.
Prince Asare Vitenu-Sackey, Department of Economics, Strathclyde Business School, University of Strathclyde, United Kingdom

Prince Asare Vitenu-Sackey is an Applied Economist and a PhD candidate at the University of Strathclyde (Glasgow, United Kingdom) with research interests in environmental, monetary, and development economics. With over 20 published articles, his work explores the intricate relationship between the environment and macroeconomic policies.
Zhengrong Yang, School of Finance and Economics, Jiangsu University, China

Zhengrong Yang is an associate professor at the School of Finance and Business, Zhenjiang College and also affiliated to Jiangsu University. Her main research field is finance and accounting. She has published more than 10 articles and presided over 3 projects.
Xintong Liu, School of Finance and Economics, Jiangsu University, China

Xintong Liu is a student majoring in insurance at the School of Finance and Economics, Jiangsu University. Her research interests lie in the broad field of insurance economics, with a particular focus on risk management, actuarial science, and low-carbon economy.