Aug 2026· International Journal of Financial Studies· 0 citations· 55 references
Abstract
This study examines both the linear and nonlinear relationship between overall Environmental, Social, and Governance (ESG) performance and firm market value, while also comparing the effects of the Environmental, Social, and Governance dimensions in publicly listed companies from the European Union. The analysis is based on an unbalanced panel of 1706 non-financial listed firms covering the period 2011–2025. Firm value is primarily measured by Tobin’s Q, with the Price-to-Book ratio and Return on Assets (ROA) used for robustness analysis. The results indicate a significant U-shaped relationship between overall ESG performance and firm value, suggesting that the value-enhancing effects of ESG emerge only after firms achieve sufficiently high sustainability performance. In contrast, the individual Environmental, Social, and Governance dimensions in most cases do not exhibit significantly different effects on firm market value. Additional subsample analyses reveal that the nonlinear relationship is more pronounced among Western European firms and companies with lower greenhouse gas emissions intensity. The findings suggest that investors primarily evaluate firms based on their overall sustainability profile rather than individual ESG dimensions. The study contributes to the ESG literature by providing further evidence of the nonlinear nature of the ESG–firm value relationship and by comparing the explanatory power of aggregated and disaggregated ESG measures within the European Union’s harmonized sustainability reporting environment.
The integration of environmental, social, and governance (ESG) factors into corporate business strategy has become progressively important, particularly for firms operating in high‐materiality industries where nonfinancial risks are more pronounced. This study examines the association between ESG performance and firm performance among European listed companies within high‐materiality industries during the period 2014–2024. Using panel data collected from established financial and sustainability databases, the analysis studies the influence of aggregate ESG scores and their individual components on key firm performance indicators, including return on assets (ROA), return on equity (ROE), and Tobin's
Q
. The empirical results reveal a predominantly positive association between ESG integration and firm performance, with stronger and more statistically significant effects observed for market‐based and operational performance measures. In particular, governance‐related ESG dimensions exhibit the most consistent positive influence, whereas environmental initiatives may impose short‐term financial constraints due to higher implementation costs. The findings highlight the importance of strategically embedding ESG considerations into corporate managerial procedures, especially in sectors characterized by high material exposure. This research contributes to the existing literature by emphasizing the role of industry‐specific materiality in shaping the ESG–performance relationship within the European context.
M. Fülöp, Javier Cifuentes‐Faura, D. Topor· Business Strategy and the En...· 0 citations
Environmental, social, and governance (ESG) performance has received growing attention from investors, regulators, and corporate managers as sustainability considerations become increasingly integrated into business decision-making. However, evidence regarding the relationship between ESG performance and firm value remains inconclusive, particularly in emerging markets. Moreover, previous studies have typically examined financial performance and ESG performance separately or focused exclusively on either aggregate ESG scores or individual ESG dimensions, limiting a comprehensive understanding of their relative importance in explaining firm value. This study investigates the influence of profitability, liquidity, solvency, firm growth, aggregate ESG performance, and the environmental, social, and governance dimensions on the firm value of Indonesian non-financial listed companies. Using panel data from 69 firms listed on the Indonesia Stock Exchange during 2022–2024, comprising 207 firm-year observations, the study employs a Random Effect Model with robust standard errors. Firm value is measured using the natural logarithm of share price (LnMV), while ESG data are obtained from Refinitiv. The results indicate that sales growth, as a proxy for firm growth, is the only variable positively and significantly associated with firm value. In contrast, profitability, liquidity, solvency, aggregate ESG performance, and the individual ESG dimensions do not exhibit statistically significant relationships with firm value. These findings suggest that investors place greater emphasis on firms’ growth prospects than on conventional financial indicators or ESG-related information when valuing Indonesian non-financial firms. The study contributes to the literature by providing recent evidence from an emerging-market context and by simultaneously evaluating financial performance, aggregate ESG performance, and individual ESG dimensions within a unified empirical framework.
Agung Dinarjito, Zef Arfiansyah, Sandi Setiadi· Ilomata International Journa...· 0 citations
This study examines the effect of Environmental, Social, and Governance (ESG) performance on firm value in the banking sector and investigates whether banking-specific ESG context moderates this relationship. Using panel data from 133 bank-year observations covering 26 banks during 2019–2024, the study employs panel regression analysis based on the Common Effect Model, Fixed Effect Model, and Random Effects Model. Model selection is performed using the Chow, Breusch–Pagan Lagrange Multiplier, and Hausman tests. ESG performance is measured using aggregate ESG performance and its environmental, social, and governance dimensions, while firm value is measured using Tobin’s Q. The results show that overall ESG performance has a negative but statistically insignificant effect on firm value. Similarly, environmental, social, and governance performance individually have no statistically significant effects on firm value. The moderation analysis further indicates that banking-specific ESG context does not significantly moderate the relationship between ESG performance and firm value, either at the aggregate level or across individual ESG dimensions. These findings suggest that ESG implementation alone may not be sufficient to generate immediate market valuation benefits. ESG value creation may depend on strategic integration, credible disclosure, effective governance, risk management, and stakeholder recognition.
Dadang Agus Suryanto· International Journal of Eco...· 0 citations
This study examines the nonlinear relationship between environmental, social, and governance (ESG) performance and market capitalization, addressing the inconclusive evidence on the value relevance of ESG. Drawing on stakeholder theory, signaling theory, and the resource-based view, the analysis employs an unbalanced panel of 15,029 firm-year observations from non-financial listed firms across selected Asian economies during 2010–2024. Using a dynamic panel estimator, the results provide formal evidence of a U-shaped relationship between ESG performance and market capitalization. The squared ESG coefficient is positive and statistically significant, while the marginal association is significantly negative at the lower bound of the observed ESG range and significantly positive at the upper bound. The estimated turning point of approximately 33.94 lies within the observed range. The findings remain robust to an alternative instrument lag structure and to ESG performance lagged by one and two years. This study demonstrates that a constant linear specification may conceal substantially different valuation associations across ESG levels. The findings highlight the importance of ESG maturity, suggesting that ESG becomes more positively associated with market capitalization as firms develop more advanced and credible ESG practices.
JEL classification numbers: G14, G30, M14, Q56.
Keywords: ESG performance, Market capitalization, U-shaped relationship, System GMM, Firm value, Asian markets.
T. Tran· Advances in Management and A...· 0 citations
This study investigates the relationship between Environmental, Social, and Governance (ESG) performance and firm performance among 338 firms (747 firm-year observations) listed on Bursa Malaysia from 2018 to 2023. Using a fixed-effects panel regression approach, the analysis evaluates the direct impact of ESG performance on financial performance, measured by return on equity (ROE), and market performance, measured by Tobin’s Q (TQ). The results show that ESG performance alone does not significantly enhance firm outcomes, with ESG scores displaying a significant negative association with market valuation, suggesting that the high costs and complexities of implementing ESG initiatives may outweigh short-term benefits in investor assessments. Firm-specific characteristics are found to moderate the ESG - performance relationship. Larger firms show weaker market outcomes when ESG engagement is high, reflecting delayed returns and greater implementation challenges. In contrast, external validation through inclusion in the FTSE4Good Bursa Malaysia Index (F4GBM) positively moderates the ESG-TQ relationship, underscoring the importance of recognition by sustainability indices in strengthening market confidence whereas Shariah compliance does not exhibit significant moderating effects. The findings highlight the multifaceted and context-dependent nature of ESG outcomes in Malaysia, offering valuable implications for firms, investors, and regulators seeking to align sustainability with financial and market success.
M. Tareq, Chong He Ong, Asyraf Abdul Halim· International Journal of Ban...· 0 citations
Background: Environmental, Social, and Governance (ESG) has become an increasingly important non-financial factor in assessing corporate sustainability and long-term performance.
Objective: This research seeks to analyze the impact of Environmental, Social, and Governance (ESG) factors on corporate value and to explore the role of earnings management as a moderating variable in the relationship between ESG and firm value.
Methods: This research utilizes a quantitative methodology, drawing on panel data from consumer goods firms listed on the Indonesia Stock Exchange for the period spanning 2022 to 2025. The sample comprises 31 companies, yielding 124 firm-year observations, which were selected through purposive sampling. Environmental, Social, and Governance (ESG) performance is assessed via a disclosure index aligned with the Global Reporting Initiative (GRI) standards, while firm value is represented by Tobin’s Q.
Results: This finding indicates that investors and consumers in the consumer goods sector continue to place greater emphasis on financial performance, product quality, price, and brand reputation than on sustainability-related information. Furthermore, earnings management is not proven to moderate the relationship between ESG and firm value. This study contributes to the literature by highlighting that the effectiveness of ESG in enhancing firm value depends not only on disclosure practices but also on market characteristics, investor perceptions, consumer behavior, and the firm's ability to integrate sustainability initiatives into business strategies that generate tangible economic benefits.
Conclusion: The findings provide implications for managers and regulators in improving the quality of ESG implementation and ensuring that sustainability practices contribute to long-term value creation.
Eka Anugerah Putra, Amrie Firmansyah· Journal of Business, Social...· 0 citations
