Does Environmental, Social and Governance Have an Impact on Stock Performance? A Panel Study of Indian Companies

Abstract

The present study investigates the impact of environmental, social, and governance (ESG) on firms' profitability in the Indian setting on a sample of 23 firms. The bootstrap corrected fixed effects estimation and inference in the dynamic panel method is employed to investigate the relationship. The dynamic panel results show that the relationship between ESG score and firms' profitability is inconclusive in the short run. However, governance conditions affect firms' investment decisions and the nexus between ESG and firm financial performance in the long run. Therefore, institutional reforms are warranted to stabilise property rights and check parent-client politics for the long-run effects of sustainable environmental governance on firms' profitability.