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- © University of Latvia, 2002-2023
Article
ANALYSIS OF THE RELATIONSHIP BETWEEN ENVIRONMENTAL, SOCIAL AND GOVERNANCE FACTORS AND FINANCIAL PERFORMANCE OF ROMANIAN SMALL AND MEDIUM SIZED ENTREPRISES
Alexandra Danila, Gabriela Gheorghiu, Raluca Andreea Trandafir,Cristinel Iftene, Adrian Serban-Comanescu
ABSTRACT: The present study analyses the relationship between environmental, social and governance (ESG) factors and financial performance by examining the role of each factor in determining the profitability of a company. The sample used includes small and medium sized enterprises (SMEs) located in Romania and operating in tourism, the reference period being five years (2017 - 2022). Empirical findings of the study indicate that the association between ESG and financial performance is a positive one, suggesting that improving ESG practices would effectively lead to improvements in profitability of SMEs. Our study develops existing literature by evaluating the ESG-financial performance link in case of SMEs, which is poorly explored.
KEYWORDS: ESG factors, financial performance, small and medium sized enterprises, Romania
JEL classification: G34, M14, M40.