A Study on the Relationship between ESG Performance Information and Value-Relevance: Focusing on Travel & Tourism Industry in Korea

Purpose - This study investigates the value-relevance of ESG performance information in the Korean travel & tourism industry. ESG activities (environment, social, and governance) are critical factors for evaluating corporate value. However, when it comes to the travel and tourism section, whether the ESG performance information is incorporated in financial corporate value is questionable since the distinct guidelines on ESG performance does not exist. Design/Methodology/Approach - This study hypothesizes that ESG performance information is not relevant to the corporate value in the travel and tourism industry. Using the KSE and KOSDAQ listed-firms in the travel & tourism industry for 2011-2020, this study conducts a univariate test as well as multiple regression analysis which estimates the relationship between stock price and ESG ratings. Ohlson (1995)’s model estimating value-relevance of accounting information is employed to test the hypothesis. Findings - The analysis shows that both ESG reporting itself and ESG integration ratings are positively related to stock price as a proxy for corporate value. But the governance (G) factor only out of three- ESG individual components has a significantly positive relation with the corporate value. The findings hold after addressing a self-selection bias which is due to ESG reporting incentives. Research Implications - In perspective of the usefulness of accounting information, this study extends the literature on value-relevance of ESG ratings as a nonfinancial accounting information. In addition, it adds the document on the effectiveness of ESG initiative by empirical results. Finally, it suggests the needs for guidelines which are appropriate for pricing the performance of social responsibilities (S) including sustainable environment € to be incorporated in corporate value.