The Effects of ESG Score on Goodwill : A Quantitative Study on Swedish Listed Companies

Abstract: Sustainability of businesses, if not more, is equally important as profitability. As a means of measuring sustainability, the ESG score has solidified its acceptance among firms as well as other stakeholders all over the world. In the world of business, the only permanent thing is evaluation. Like sustainability, the paradigm has also been shifted from tangible to intangible assets like goodwill, patents, trademark, etc. In recent years, ESG as a sustainability performance evaluation system has drawn the attention of many academics and students as a topic of research. There have been many studies highlighting the relationship of firms’ sustainability performance with their economic outcomes and risks. However, no study has been conducted on the impact of ESG scores on goodwill. Our study evaluates the relationship between ESG scores and firms’ goodwill.Sweden is chosen as the research area which is the highest-ranked country in terms of sustainability in the years 2017 and 2018. There is a high probability of getting a dependable result where ESG is given proper importance. Rifinitiv datastream is used as the source of data for this study. We have considered the listed companies of OMX Stockholm 30 (except 4 banks) as a sample from the year 2010 to 2019. We have considered shareholder theory, stakeholder theory, legitimacy theory, goodwill, and merger and acquisition to analyze and interpret the underlying significance of our study. The result of our study shows that there is a significant negative impact of ESG score on gross goodwill/ total asset. Similar results have been found between the individual E, S, and G scores and gross goodwill/ total assets.