Unveiling the nexus between environmental, social, governance variables and firm performance: An empirical investigation

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Abstract

The present study is based on the investigation of the effect of environmental, social, and governance (ESG) performance combined and its sub-elements E — environmental, S — social, and G — governance separately as independent variables along with LEVERAGE, SIZE, logarithm of total assets (LOG_TA), BETA, and INFLATION as control variables and the corporate’s operational and financial performance measured by return on assets (ROA) and return on equity (ROE). In this research, the sample of NIFTY50 firms for the period of 2015–2022 was studied. The research is based on panel data regression analysis applied with a fixed effect model, as it was found suitable as compared to pooled ordinary least squares (OLS) and random effect models with the help of the Hausman test. We observed that ESG was found insignificant with ROA in Model 1, environmental pillar score (EPS) in Model 2, and social pillar score (SPS) in Model 3 along with governance pillar score (GPS) in Model 4 while in the case of ROE as a dependent variable, Model 1 ESG was found negatively significant with ROE, EPS in Model 2 and SPS in Model 3 failed to be statistically significant with dependent variable ROE but lastly in Model 4 GPS found negatively significant with ROE. The finding of this study is specific in relation to the data set used and further research outcomes may be traceable through different industries, the outcome of the study will be useful for corporations, policymakers and other stakeholders having financial and non-financial interests.

Keywords: ESG, Governance Pillar Score (GPS), Environmental Pillar Score (EPS), ROA, ROE

Authors’ individual contribution: Conceptualization — M.A.I.; Methodology — M.A.I. and E.H.; Software — M.A.I. and N.C.; Validation — F.S. and N.T.; Formal Analysis — M.A.I. and M.S.; Data Curation — E.H. and F.S.; Writing — Review & Editing — A.F.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M41, Q51, Q54, Q56, Q57

Received: 02.03.2024
Accepted: 16.09.2024
Published online: 18.09.2024

How to cite this paper: Intezar, M. A., Haque, E., Chaudhary, N., Siddiqui, F., Tasneem, N., Shariq, M., & Fatima, A. (2024). Unveiling the nexus between environmental, social, governance variables and firm performance: An empirical investigation. Journal of Governance & Regulation, 13(4), 46–53. https://doi.org/10.22495/jgrv13i4art5