Competition and ESG practices in emerging markets - Evidence from a difference-in-differences model

Finance Research Letters, 46*(A), 102371, doi

Product market competition is an important driver of firms’ ESG practices.

Competition and ESG practices in emerging markets: Evidence from a difference-in-differences model

Abstract:

This paper investigates how competition affects firms’ environmental, social, and governance (ESG) practices in 22 emerging markets, using a sample of 6,906 firm-year observations from 2011 to 2019. Using a difference-in-differences technique and matched samples with a treated and a control group, I explore exogenous variation in the competitive environment of one country, Brazil, to assess the competition?s causal effect on ESG. The results suggest that firms adjust ESG practices negatively after a shock in competition, contrasting with previous results from developed economies.