How Much Does Matter ESG Ratings in Big Pharma Firms Performances?

Given the peculiarities of the pharmaceutical sector and its wide exposure to ESG factors, this chapter aims to verify the possible presence and the strength of a relationship between firms ESG scores and their economic-financial performance. We consider a benchmark sample of 103 pharmaceutical companies listed around the world, exhibiting ESG scores from 2004 to 2018. Firstly, results showed that the governance score has a negative impact on ROA and a positive impact on Tobin's Q. Secondly, considering the firm size, all the ESG scores on which research hypotheses were tested gain statistical significance. In particular, for smaller pharmaceutical companies, both the governance and controversies score have a negative impact on ROA. While, as the firm size grows, the controversies score has a positive impact on both ROA and Tobin's Q. Finally, there is an inverted U-shaped non-linear relationship between ESG scores and Tobin’s Q.