Does ESG Improve Firm Performance? Evidence from Indian Companies

Abstract

This research paper explores the association between ESG i.e.; Environmental, Social, and Governance factors, and the financial performance of 37 Indian companies. It shows how ESG financial execution influences the profitability of companies and its contributions toward sustainable development. It employs various regression models including pooled OLS, fixed effect, and random effect models as well as dynamic panel regression. This study results positively significant connection between ESG performance and firm performance in terms of capital efficiency. Return on Assets (ROA), Return on Equity (ROE) and Return on Capital Employed (ROCE) - these various financial metrics have demonstrated this positive connection. To support our findings this study employs both static and dynamic panel analysis. The insights of this paper are valuable for the stakeholders including policymakers, corporate managers, and investors who are interested in ESG principles and in understanding the relationship between ESG practices and companies financial performance. Key Words: ESG; Firm Performance; Sustainability; GMM Model.