To sum up, most studies recognize that firms with strong commitment to CSR have better corporate financial performance. Eccles, Ioannou and Serafeim (2012) find that high sustainability firms have better stock and accounting performance in long run. Luo and Bhattacharya (2006) offer the evidence that CSR strength result in higher market value by increasing customer satisfaction. When it comes to the impact of ESG on corporate financial performance, scholars work on the both the aggregate and disaggregated ESG, yet literatures on disaggregated ESG performance still outnumber the aggregate one. The reason stated by Fulton, Kahn, Sharples (2012) is similar to the one given above. Main results found in those papers vary; however, we can still conclude that in most papers, there is a positive relationship between ESG factors and corporate financial performance. Many researchers studied the effect of corporate governance. Gompers et al. (2003) construct a governance index and realize that ‘firms with stronger shareholder rights own higher firm value, higher profits, lower capital expenditures, and made fewer corporate acquisitions.’ Ammann et al (2010) construct other three indices of …show more content…
Except for the internal motivation, the external “push” from civil society, government, NGOs and investors is merging. Taking environmental pillar as an example, EU has approved the Environmental Liability Directive and made firms financially liable for solving their environmental externalities. In the U.S., the administration of President Barack Obama has pledged to increase enforcement of existing environmental regulations and adopt stricter standards. Thirty additional contaminants under the federal Safe Water Drinking Act are taken into account by U.S. Environmental Protection Agency. Tougher and future regulations mean future risks or even liabilities for companies. From the perspective of investors, institutional and other large assets owners, they possess a slice of entire economy, and thus seeking for a long-term, enduring economic growth. Other investors, who adopt a best-in-class approach and pursue continual outperformance of firms, think of ESG factors as