ESG disclosure and firm performance in global south economy: Does industry profile and board independence moderate the relationship

Nisha Bamel, Komal Khatri, Umesh Bamel and Satish Kumar

International Review of Economics & Finance, 2025, vol. 100, issue C

Abstract: Our paper explores the connection between ESG disclosure and firm performance (operational performance, accounting performance, financial performance, and market performance) in the context of the global south. Specifically, we investigated this relationship by gathering data from 237 firms listed on the Bombay Stock Exchange index, comprising 139 observations from heavy industries and 98 from light industries. Additionally, we examine the conditional effect of industry profile (heavy industry vs. light industry) and percentage of board independence. We employed panel regression method for data analysis. Our results indicate a positive and significant relationship between ESG disclosure and firm performance. Overall, we found that a higher ESG disclosure score is associated with improved firm performance across all four performance indicators. When considering individual components of ESG disclosure, we observed that governance disclosure score exhibited a positive and significant relationship with all four indicators of firm performance. On the other hand, environment and social disclosure scores showed a positive and significant relationship only with operational performance and market performance. Furthermore, our analysis revealed that industry profile moderates the relationship between ESG disclosure score and firm performance indicators. Specifically, it affects operational performance, and market performance. The moderating effect of board independence also significantly moderated the relationship. Specifically, board independence influences the relationship with operational, accounting and market performance concerning governance disclosure score, whereas for environment and social disclosure scores, it only influenced accounting and financial performance. Our findings offer a comprehensive analysis of the relationship between ESG disclosure and firm performance, considering various performance indicators and the influence of industry profile and board independence. These insights contribute significantly to both theoretical understanding and practical applications in this field.

Keywords: Firm performance; ESG disclosure score; Industry profile; Heavy industry; Light industry; Board independence; Global south (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:100:y:2025:i:c:s1059056025002564

DOI: 10.1016/j.iref.2025.104093

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