Does size matter? Exploring the moderating role of firm size in the ESG

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Gazi İktisat ve İşletme Dergisi
Cilt: 11 Sayı: 3
Does size matter? Exploring the moderating role of firm size in the ESG–profitability relationship

Does size matter? Exploring the moderating role of firm size in the ESG–profitability relationship

Authors : Burcu Zengin

Pages : 268-283

Doi:10.30855/gjeb.2025.11.3.005

View : 157 | Download : 1106

Publication Date : 2025-10-27

Article Type : Research Paper

Abstract :This study investigates the impact of environmental, social, and governance (ESG) performance on firm financial outcomes, with a particular focus on the moderating role of firm size. Using panel data from 227 U.S.-based consumer sector companies obtained from the S&P Global database, the analysis centers on earnings before interest and taxes (EBIT) to measure operational profitability. Anchored in signaling theory and trade-off theory, the study aims to explore whether firm size influences the strength and direction of the ESG–financial performance relationship. Contrary to theoretical expectations, the results reveal a negative relationship between ESG performance and EBIT, while firm size is positively associated with EBIT. Importantly, the interaction term between ESG performance and firm size exerts a positive and statistically significant effect on EBIT, confirming the moderating role of firm size. Similar results were obtained in the robustness check conducted on a subsample of firms whose size exceeded the sample mean, reinforcing the conclusion that larger firms are better positioned to convert ESG initiatives into financial benefits. These findings suggest that the financial benefits of ESG initiatives are more likely to materialize in larger firms, which are better equipped to absorb ESG-related costs and leverage reputational gains. The study contributes to the sustainable finance literature by offering empirical insights into how firm-specific characteristics shape the effectiveness of ESG strategies. Practical implications are also provided for investors, regulators, and corporate decision-makers aiming to reconcile sustainability goals with financial performance.
Keywords : esg, firma büyüklüğü, karlılık, sürdürülebilirlik

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