Analysis of the relationship between foreign shareholding and ESG performance of South African listed companies

Addison, Kate

Analysis of the relationship between foreign shareholding and ESG performance of South African listed companies

Thesis / Dissertation

2023

Abstract

Given the global movement towards sustainability and the stagnant economic growth of South Africa, this study seeks to determine if there is a relationship between the foreign shareholding percentage of listed companies and the environmental, social and governance (ESG) scores of these companies. Foreign investment has been identified as a driver of economic growth. This study examines the relationship between ESG scores of JSE-listed companies and the percentage of foreign shareholding of these companies from 2015 to 2019. This study relied on ESG data provided by the FTSE Russell. In analysing the data through a generalised linear mixed effects model, this study identified a positive and significant association between the overall ESG, environmental, and social scores and the percentage of foreign shareholding, respectively. Stakeholder theory suggests that companies will determine action based on the interests of all relevant stakeholders. Where foreign shareholders are concerned about ESG performance, companies increase their ESG ratings, taking both their current and future investors into consideration. This study is value-adding in providing evidence for the South African government to mandate a national transition to better ESG practices.

Keywords

Financial Reporting, Analysis and Governance

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