Sustainability Performance and Corporate Risk: Evidence From the Tourism Industry

We investigate the impact of sustainability performance (Refinitiv Environmental, Social, and Governance [ESG] scores) on corporate risk (CR). We apply stakeholder theory and the resource-based view to an international sample of 247 tourism firms from 2002 to 2018. We demonstrate a negative association between ESG and CR, which is more pronounced when pension funds act as the controlling shareholders. We reveal that tourism firms with stronger ESG performance have statistically and economically significantly less risk of volatile earnings and a lower probability of failure than their counterparts with poor ESG. Our findings are robust to endogeneity and model misspecification. Overall, we add new evidence suggesting that ESG generates value and concrete positive outcomes for tourism firms, an effect moderated by the identity of controlling shareholders.