This thesis examines the relationship between Environmental, Social, and Governance (ESG) performance and firms’ financial strength in the Dutch market. Motivated by the increasing regulatory emphasis on sustainability reporting under the EU Corporate Sustainability Reporting Directive (CSRD), the study evaluates whether ESG engagement contributes to firms’ internal financial robustness, particularly during periods of economic disruption. Financial strength is measured using the Piotroski F-score, a multidimensional accounting-based index capturing profitability, liquidity and leverage, and operational efficiency.
Using panel data on Dutch listed firms from 2019–2024 and applying ordinary least squares regressions with year fixed effects, the study tests two hypotheses: (1) that ESG performance is positively associated with financial strength, and (2) that the association differs between the pandemic period (2019–2021) and the post-pandemic recovery (2022–2024). The analysis finds no statistically significant relationship between ESG scores and overall financial strength across any specification. A decomposition of the F-score into its three underlying dimensions similarly reveals no significant ESG effects on profitability, liquidity/leverage, or efficiency.
Robustness checks, including regressions using individual ESG pillars and alternative performance measures based on stock returns, confirm the stability of these null results. The findings suggest that ESG engagement does not yield measurable short-term financial benefits within the observed timeframe and that differences between crisis and recovery periods do not materially alter this conclusion.
The study contributes to the ESG–finance literature by providing firm-level evidence from a regulatory environment with advanced sustainability reporting requirements and by demonstrating that accounting-based measures such as the F-score may not capture potential long-term or gradual benefits of ESG engagement. The results highlight the need for longer observational windows and more granular sustainability data to further evaluate the financial implications of ESG practices in Europe.