ESG INVESTMENT AND FIRM VALUE: THE MODERATING ROLE OF CORPORATE REPUTATION IN ADVANCING CORPORATE SUSTAINABILITY AND SUSTAINABLE GROWTH IN BANGLADESH

Abstract

Emerging-market firms are asked to fund environmental, social and governance commitments at a moment when capital is scarce and investors still question whether corporate sustainability spending destroys or creates shareholder wealth; in Bangladesh, where the cumulative intensity of green-banking and disclosure directives has risen almost eightfold since 2004, the value consequences of such spending remain unsettled. This study examines whether ESG investment raises firm value and whether corporate reputation conditions that relationship. The analysis employs a balanced panel of 110 non-financial firms listed on the Dhaka Stock Exchange over 2004–2024, comprising 2,310 firm-year observations, and applies two-way fixed-effects moderation models, panel unit-root and cointegration tests, pooled mean group ARDL estimation, a panel vector autoregression with variance decomposition, Dumitrescu–Hurlin causality tests, mediation decomposition and two-stage least squares. The results show that ESG investment raises Tobin’s Q (β = 0.126, p = .001) and that the ESG × reputation interaction is positive and significant (β = 0.117, p < .001), lifting explained variance by 5.5 percentage points; the marginal effect of ESG investment is indistinguishable from zero below a Johnson–Neyman reputation threshold of 49.6 and reaches 0.305 one standard deviation above the reputation mean. Panel cointegration is confirmed, the pooled mean group long-run ESG coefficient is 0.457, and the error-correction speed is −0.619. The findings suggest that reputation is a complement rather than a substitute for ESG investment, that approximately 15% of the ESG–value relation is transmitted through reputation building, and that the payoff to sustainable growth commitments is contingent rather than automatic.