ESG footprint and investment-cash flow sensitivity: the role group affiliation

Abstract

Purpose This study aims to examine the investment-cash flow sensitivity (ICFS) and the impact of environmental, social and governance (ESG) on ICFS of manufacturing firms in India. Furthermore, it explores the role of group affiliation in such ESG–ICFS nexus. Design/methodology/approach The paper uses the generalized method of moments regression to analyze the data with a sample of 222 manufacturing firms from 2012 to 2022. Findings The paper reveals that Indian manufacturing firms mainly depend on internal cash flow for their investment decision, and ESG footprint reduces such sensitivity of investment-cash flow. Furthermore, group-affiliated firms have greater ICFS, and the impact of ESG on ICFS is more noticeable in group-affiliated firms than in standalone counterparts. Originality/value This paper provides valuable insights into current literature, with implications that extend to economies, firms, managers and investors. To the authors’ knowledge, this paper examining the impact of ESG on ICFS amidst group affiliation is first-of-its-kind.