sajm






ESG Score and Firm Performance: Evidence from Indian–Listed Firms

Rajat Deb, Anita Behra and Karkaria Dusmanta

DOI: https://doi.org/10.62206/sajm.30.4.2023.56-80

PUBLISHED : 26 Feb 2024

Abstract

Focusing on Environmental, Social, and Governance (ESG) issues has emerged as a move towards long-term sustainability by companies aspiring to bring about positive societal change along with profit-making. There is a tendency among firms now a days to adopt ESG- oriented policies to show their commitment to sustainable development. The general finding of the extant literature on this is that ESG improves Firm Performance (FP), although there are a few studies that report mixed and inconclusive results varying with FP-criteria, the country where the research is carried out, and the periods of observation. The present study aims to investigate the relationship between ESG scores and the FP of Indian-listed firms. Adopting a longitudinal research design and accessing secondary data for thirteen years from 2009-10 to 2021-22, we chose 585 firms listed in the Nifty100 Index. Applying panel data regression, this study has observed a significant negative impact of ESG on FP measured by Return on Assets (ROA) and Return on Equity (ROE), which supports the Trade-off theory; however, when the performance measure was changed to Tobin’s Q (the ratio of the firm’s market value to its book value), the relationship was positive and significant which supports the Stakeholder theory. The paper concludes with the acknowledgement of limitations, discussions on policy implications, and suggestions for future research.

Key Words

ESG, Firm performance, Inferential statistics, Nifty 100 Index, Stakeholder theory, Trade-off theory

Author Biography

Rajat Deb
Assistant Professor, Department of Commerce, Tripura University, Suryamaninagar-799022, West Tripura, Tripura, India; and is the corresponding author. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Anita Behra
Ph.D., Scholar, Department of Commerce, Tripura University, Suryamaninagar-799022, West Tripura, Tripura, India. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Karkaria Dusmanta
Ph.D., Scholar, Department of Banking Technology, School of Management, Pondicherry University, Puducherry-605014, India; and is the corresponding author. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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