SECTOR HETEROGENEITY IN THE RELATIONSHIP BETWEEN CORPORATE FINANCIAL PERFORMANCE AND ESG RATINGS OF PUBLIC COMPANIES: A SECTOR-LEVEL REGRESSION ANALYSIS

Abstract

This study examines whether the relationship between corporate financial performance (CFP) and environmental, social, and governance (ESG) ratings varies across Global Industry Classification Standard (GICS) sectors. Using ESG ratings from LSEG Data & Analytics and financial data from Yahoo Finance for a sample of 748 publicly listed companies, the study estimates separate OLS regressions of the Total ESG score on ten financial, valuation, ownership, and firm-characteristic variables within each of the eleven GICS sectors. The results reveal substantial heterogeneity: Information Technology and Healthcare show the highest explanatory power (R² = 0.54 each), followed by Industrials (R² = 0.49), while the Consumer Discretionary model is not statistically significant (R² = 0.08). Market capitalisation is the most consistent positive predictor across sectors, while the P/S ratio and ownership concentration are consistently negative where significant. The findings indicate that the CFP–ESG relationship is not uniform but strongly conditioned by sector-specific structural and ownership characteristics.