Impact of ESG on firm value: a conceptual review of the literature

Radhika Narula (), Purnima Rao () and Akshat Aditya Rao ()
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Radhika Narula: FPM Scholar, Fortune Institute of International Business (FIIB)
Purnima Rao: Fortune Institute of International Business (FIIB)
Akshat Aditya Rao: The North Cap University Gurgaon

Journal of Social and Economic Development, 2023, vol. 25, issue 1, No 9, 162-179

Abstract: Abstract This study proposes a conceptual framework linking economic, social, and governance (ESG) practices to firm value creation by controlling for firm-specific and industry-specific factors. The novelty of this framework lies in connecting various channels of influence, namely (i) capital allocators, (ii) stakeholders, and (iii) corporate sustainability reporting tools (SRTs), which drive ESG practice, which, in turn, has a catalytic effect on firm value creation and wealth maximization. Extant literature has discussed various drivers of firm valuation. Our study is unique in that it provides a research and theoretical rationale for studying value maximization through the lens of ESG, a non-financial, firm micro-driver in a multi-actor environment. Sustainability has gained traction from investors, firms, and regulators worldwide, and especially after the pandemic, it has reignited interest to study sustainability as a key enabler for long-term value creation.

Keywords: Conceptual framework; ESG investing; Shareholder wealth; Firm value; ESG; Stakeholders (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s40847-023-00267-8

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