Impact of ESG Performance on Financial Returns and Firm Valuation: A Conceptual Review

Abstract Book of the 11th International Conference on Research in Management and Economics

Year: 2026

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Impact of ESG Performance on Financial Returns and Firm Valuation: A Conceptual Review

Faniza Joshi

ABSTRACT:

The present research examined the connection between sustainability-oriented corporate actions and economic performance in the light of the capital markets in India. The quantitative and explanatory research design was adopted based on balanced panel data of companies listed in major stock exchanges in India in a span of five years. Sustainability orientation was measured based on composite and pillar level measures of environmental stewardship, social responsibility, and the quality of governance based on standardized disclosures. Profitability measures and market-based measures based on the opinion of the investors were used to assess economic outcomes. Fixed-effects panel regression models have been used to capture the unobserved heterogeneity on the firm level, and the control variables have been used, including firm size, leverage, age and growth opportunities. The empirical evidence showed that there was a positive and statistically significant relationship between sustainability orientation and the profitability as well as the market-based outcomes. The strongest influence was on governance-related practices, which was followed by social initiatives, and finally, the environmental initiatives had a stronger association with the long-term market perception compared to short-term profitability. The results showed that capital market participants were becoming more aware and compensated companies that showed responsible and transparent business practices.

Keywords: Capital Market Outcomes; Corporate Governance Quality; Profitability Indicators; Responsible Business Practices; Sustainability Orientation; Stakeholder Value Creation